Li Auto (LI) Surges 5.34% on Strategic Collaboration and Sector Momentum

Summary
• Li Auto’s stock jumps 5.34% to $17.045, breaking above its 52-week low of $16.11
• DJI-Li Auto camping workshop highlights L9 model integration with portable power solutions
• Borrow rate spikes to 1.29%, signaling heightened short-term interest

Li Auto’s intraday rally reflects a confluence of strategic partnerships and sector-specific tailwinds. The collaboration with DJI to showcase the L9 model’s compatibility with cutting-edge power solutions has ignited investor optimism. Meanwhile, the stock’s technical setup near key support levels and a sector-wide shift toward electrification amplify its near-term appeal.

DJI Collaboration Fuels Optimism in EV Ecosystem
The partnership with DJI, demonstrated at the Daytour Camping Workshop, positioned Li Auto’s L9 as a versatile platform for outdoor innovation. By integrating DJI Power 2000 and Osmo Action 6, the event underscored the L9’s adaptability to modern lifestyles, particularly in emerging markets like the Philippines. This real-world validation of the vehicle’s utility in off-grid scenarios has attracted both retail and institutional buyers, driving liquidity and price momentum.

EV Sector Mixed as Tesla Slumps, Li Auto Gains
While Tesla (TSLA) fell 0.9% amid production concerns, Li Auto’s rally outperformed peers like NIO (-1.93%) and XPeng (+7.66%). The EV sector remains fragmented, with Li Auto’s focus on hybrid solutions and localized partnerships offering a distinct edge in markets prioritizing range flexibility and infrastructure compatibility.

Options Playbook: Capitalizing on Volatility and Liquidity
• 200-day average: 24.58 (well below current price)
• RSI: 21.15 (oversold)
• MACD: -0.94 (bearish but flattening)
• Bollinger Bands: Price at $17.045, near lower band ($16.10)
• Support/Resistance: 30D support at $16.15, 200D resistance at $23.98

The technical setup suggests a short-term rebound from oversold levels, with key resistance at $17.50 (Bollinger middle band). For options traders, the LI20251226C17 and LI20251226C17.5 contracts offer compelling leverage and liquidity.

• LI20251226C17
- Strike: $17, Expiry: 12/26, IV: 29.28%, Leverage: 53.23%, Delta: 0.5358, Theta: -0.0637, Gamma: 0.5381, Turnover: 10,749
- IV (Implied Volatility): Reflects moderate uncertainty; Leverage amplifies gains if price breaks above $17.50; Delta indicates moderate sensitivity to price moves; Gamma ensures rapid delta adjustment as the stock rises.
- This call option balances risk and reward, ideal for a bullish breakout scenario. A 5% upside to $17.90 would yield a payoff of $0.90 per contract, translating to a 16.67% return on the $5.45 premium.

• LI20251226C17.5
- Strike: $17.5, Expiry: 12/26, IV: 34.31%, Leverage: 100.21%, Delta: 0.3131, Theta: -0.0458, Gamma: 0.4095, Turnover: 10,461
- IV (Implied Volatility): Slightly elevated, reflecting higher uncertainty; Leverage offers aggressive upside if the stock surges; Delta suggests lower immediate sensitivity but higher gamma for rapid delta gains.
- This contract thrives in a sharp rally. A 5% move to $17.90 would generate a $0.40 payoff, a 39.2% return on the $1.02 premium. However, its lower delta requires a stronger move to justify the higher leverage.

Action Insight: Aggressive bulls may consider LI20251226C17 into a bounce above $17.50, while LI20251226C17.5 suits those betting on a sharper breakout.

Backtest Li Auto Stock Performance
The impact of a 5% intraday surge on Li Auto (LI) from 2022 to the present has been thoroughly backtested. The strategy resulted in a cumulative return of -86.79%, with an annualized return of -164.44% and a maximum draw-down of 89.56%. The strategy's performance was notably poor, as evidenced by the negative Sharpe ratio of -1.18. Insights and Context:1. Li Auto's Performance Post-Surge: The backtest reveals that following a 5% intraday surge, LI experienced significant downturns, highlighting the strategy's ineffectiveness in this period. This is critical for investors considering such a strategy, especially given the substantial draw-downs and negative returns.2. Bank of America's Support: Despite the earnings miss, Bank of America remains constructive on Li Auto, anticipating profitability in 2023 on a non-GAAP basis. The firm maintains a Buy rating with a price target of $29 or HKD113, suggesting a long-term positive outlook despite short-term challenges.In conclusion, while a 5% intraday surge may appear attractive, the backtest indicates it led to substantial underperformance for LI. Investors should weigh this finding against Bank of America's positive long-term outlook before making investment decisions.

Positioning for a Sector-Driven Rally: Key Levels to Watch
Li Auto’s rally is underpinned by strategic validation and technical oversold conditions, but sustainability hinges on breaking above $17.50 to re-engage the 200-day average. Investors should monitor the 52-week low ($16.11) as a critical support level and the sector leader Tesla’s (-0.9%) performance for broader sentiment cues. A sustained move above $17.50 could trigger a re-rating of the stock’s valuation, while a breakdown below $16.69 would signal renewed bearish momentum. Watch for $17.50 breakout or Tesla’s regulatory clarity.