Image Source: Pixabay

The NIO stock price has suffered a big reversal in the past few weeks as concerns about the Chinese electric vehicle (EV) industry continued. It dropped to the psychological level at $5, its lowest level since August, and 40% from the year-to-date high. 

Nio stock price technical analysis suggests more downside 

The daily timeframe chart shows that the Nio share price has been in a strong downward in the past few months, mirroring the performance of other Chinese EV companies like XPeng and Li Auto.

It has moved from the year-to-date high of $8.05 to the current $5, which has coincided with the 50% Fibonacci Retracement level.

Worse, the stock is about to form a death cross pattern, which is characterized by the bearish crossover of the 200-day and the 50-day Weighted Moving Averages (WMA). A death cross is one of the most common bearish continuation signs in technical analysis.

The Relative Strength Index (RSI) and the MACD indicators have also continued falling in the past few months and are hovering near their oversold levels.

It has also moved below the Supertrend indicator, a sign that bears remain in control this year. Additionally, it has formed a bearish pennant pattern, which is characterized by a vertical line and a symmetrical triangle pattern. 

Therefore, the most likely Nio stock price forecast is bearish, with the next key support level to watch being at $4.95, which is along the 61.8 Fibonacci Retracement level. 

A move above the key resistance level at $5.50 will invalidate the bearish outlook and point to more gains.

(Click on image to enlarge)

Nio stock chart | Source: TradingView

Nio’s business continues to struggle 

The ongoing Nio share price crash has plunged, mirroring the performance of other companies in the Chinese EV industry. XPeng stock has plummeted by 30% from the year-to-date high of $28.

Similarly, Li Auto has plunged by 46% from the year-to-date high, while Polestar has dropped by 70% from the August high. Other companies like BYD, Geely, Leapmotor, and Zeekr.

Nio and other Chinese EV companies have slumped as investors remain concerned about China’s demand after the end of incentives in some key states. 

It also stumbled after the company warned of weaker fourth-quarter numbers in its recent report. The most recent numbers revealed that its third-quarter deliveries jumped by 40% to 87,071. 

Its revenue rose by 16.7% to $3.06 billion, while the gross margin moved to 13.9% from the previous 10.7%. Still, the company made a big loss of $408 million, an improvement of 31%.

The continued losses mean that the company may soon announce another fundraising that will lead to more dilution. Its outstanding shares have jumped to 2.09 billion, up sharply from the 2021 low of 1.36 billion. The company recently diluted its investors by raising $1.16 billion by selling its shares. 

Nio also issued a weaker-than-expected guidance. It expected its sales to be between 120,000 and 1225,0200, lower than the median estimate. It now expects that it will break even in the fourth year of 2026.

Analysts are still optimistic that the company’s stock will rebound, with the average target being 6.70, higher than the current $4.9.

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