On Wednesday, NIO makes a great comeback after a rough start.
NIO rebounded strongly in the afternoon, erasing its losses.
From the 200-day moving average, the Chinese electric vehicle company made a flawless bounce.
During the second half of Thursday’s session, NIO stock made a strong comeback. The early part of the day was a blur, as NIO stock plummeted in response to the entire market’s downturn. Concerns about the Delta variation had risen, and notably NIO had been harmed by the unfavorable read-across from DIDI. As China appears to tighten its regulatory crackdown, Chinese stocks have been in the spotlight for all the wrong reasons. NIO began 6% lower and appeared to be on the verge of breaking through our $42 support level. The bears were held at away by the 200-day moving average at $42.50, and NIO rallied a stunning 5% to close at $45.60, losing less than 1% on the day. This $42 level had been recognized as our support, but we had warned that the zone around $35 was stronger. Those of you with strong stomachs who bought near the lows of $42 were well served.
Statistics from the National Institute of Health
$79 billion in market capitalization
Last year’s price/earnings ratio was -83.
Price/Book 19 Enterprise Value $56 billion Price/Sales 25
Net Margin: 16 percent Gross Margin: 16 percent
Buy $54.89 based on the average Wall Street rating and price target
Since plunging to roughly $30 in May, NIO has steadily increased in value. Since then, the stock has steadily risen in pace with other industry peers, with Tesla in particular having a strong June. The stock has gained almost 23% in the last month, so the loss must be viewed in context. All Chinese electric vehicle manufacturers recently reported strong delivery numbers. LiAuto (LI) delivered a record number of vehicles in June, up 166 percent year over year. XPeng (XPEV) saw a 439 percent increase in deliveries year over year, while NIO saw a nearly 116 percent increase. BYD (BYDDF), the Warren Buffet-backed Chinese electric vehicle manufacturer, saw sales jump 102 percent year over year in June. Tesla (TSLA) also set a new milestone for vehicle deliveries in the first quarter of 2021, with over 200,000 units delivered. As a result, despite worldwide semiconductor chip difficulties, all electric vehicle manufacturers appear to be setting new sales records.
1. Markets are now on more positive basis in general. Friday’s European markets and US futures are both up. For the time being, worries have been put on hold.
2. The bad news from China has now been factored in. The DIDI saga is unwelcome, but it is now well-known and dismissed. Investors have shifted their positions.
3. NIO nearly flawlessly held the 200-day level, indicating a bullish trend. NIO can look higher as long as this holds.
Now, don’t get too worked up. The bears will not be extinguished by a single rally, but the signals are better than they were yesterday. The 21-day moving average at $46.54 is NIO’s initial objective, followed by the 9-day at $48.03. This $48 area is crucial. It’s a new high, and above $48 the volume profile thins out quickly, implying less resistance. Any move higher is more difficult below $48 due to significant traffic. Returning above $48 puts a second test of the important $54.86 level squarely in the sights.
The crossover in the Moving Average Convergence Divergence (MACD) yesterday should be viewed with care. In order to support our optimistic thesis, we’d like to see this reversal rapidly.
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