The Chinese electric vehicle manufacturer headquartered in Beijing, Li Auto Inc. (NASDAQ: LI), also known as Li Xiang, shows signs of an upcoming price surge according to its latest charts.
Bullish Indications
#1 Unbroken Uptrend: The daily chart shows that Li Auto’s uptrend is unbroken, as it has been forming higher highs and higher lows for the past several weeks. This uptrend line has been marked as a purple color line. The stock had taken support near this trendline multiple times before bouncing higher again. The stock is currently moving higher after taking support near the uptrend line. This is a possible bullish indication.
Daily Chart – LI
#2 Above MA: The stock is currently trading above its short-term moving average of 50-day SMA. This indicates the overall bullishness of the stock.
#3 Bullish ADX and DI: The ADX indicator shows bullishness because the +DI line has currently crossed above the -DI line and the ADX line has started to move higher from below the +DI and the -DI lines.
#4 Bullish RSI: The daily chart shows that the RSI is currently above 50 and moving higher. This indicates the strength of the current upmove.
#5 Bullish Stochastic: The %K (blue) line of stochastic is currently above the %D (Orange) line in the daily chart. This is a possible bullish indication.
#6 Fibonacci Support: Usually, after an up-move, stocks retrace to any of the key Fibonacci levels before resuming its upmove. The weekly chart shows that the stock had bounced back higher after taking support at the 50% Fibonacci level. The stock is currently above the 61.8% Fibonacci support level. This is a possible bullish sign.
Weekly Chart – LI
#7 Bullish ADX and DI: In the weekly chart as well, the ADX indicator shows bullishness. This is because the +DI line and the ADX line is above the -DI line and the ADX line has moved higher from below the -DI and +DI lines.
Recommended Trade (based on the charts)
Buy Price: If you want to get in on this trade, you can purchase the shares of LI if it closes above the nearest resistance level. This translates to a price of around $33.70.
TP: Our target prices are $40 and $50 in the next 3-6 months.
SL: To limit risk, place a stop loss at $29.40. Note that this stop loss is on a closing basis.
Our target potential upside is almost 19% to 48% in the next 3-6 months.
For a risk of $4.30, our target rewards are $6.30 and $16.30. This is an almost 1:2 and 1:4 risk-reward trade.
In other words, this trade offers 2x to 4x rewards when compares to risks.
Risks to Consider
The stock may reverse its overall trend if it breaks down with high volume from the Fibonacci support. The sell-off of the stock could also be triggered in case of any negative news, overall weakness in the market, or any regulatory changes in the sector.
Happy Trading!
— Tara