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Tesla rival Nio is on a tear since its debut, but market watchers are cautious

The top Dow stock of 2018 just hit a record high, and the run could be just beginning

Shares of Nio, the Shanghai-based Tesla rival, have surged since debuting in the public market last week, but some investors are cautious, noting the stock has fallen from its post-IPO high.

Nio shares are up 49 percent since the company's initial public offering on Sept. 12. Mark Tepper, president and CEO of Strategic Wealth Partners, said he's wary about the company's sustainability even though there's "incredible upside for both the company and also for the entire electric vehicle industry."

"Nio's got a nice little niche carved out with their SUV line," Tepper said Thursday on CNBC's "Trading Nation." But he's concerned about the costs of its outsourcing of assembly.

"I think if you have speculative capital that you want to play with, there's enough investor hype around this space, and investor hype can lead to big profits," he said. But he added, he doesn't see that now.

From a technical standpoint, a stock trading for just over one week has yet to establish any meaningful tend. So Craig Johnson, chief market technician at Piper Jaffray, found it helpful to examine what shares of Tesla did in the days following its debut in summer 2010.

"You can see that your traditional trading typically happens, where you get the pop, you get the pullback. Nio has pulled back about 50 percent [since its post-IPO highs]; Tesla actually pulled back below its IPO price. Right now, for this stock, you're probably going to have some further backing and filling and stabilization as both buyers and sellers really start to understand the story here with the stock," Johnson said Thursday on "Trading Nation."

The stock will likely see more of this "sideways consolidation," Johnson said, but will ultimately look for a move higher.

Nio shares closed 3 percent higher on Thursday, at $8.78 per share, but were down more than 2 percent Friday.