Nio stock price has pulled back in the past two days as investors booked profits after the recent surge that pushed it from a low of $4.3 in February to a high of $7. This retreat may be a good entry point as the stock has formed a highly bullish chart pattern.
Nio stock price is forming a cup and handle pattern
The daily chart shows that the Nio share price bottomed at $4.37 in February as investors remained concerned about its dilution.
It then started a slow comeback that accelerated after it released its financial results, which showed that it made a profit in the fourth quarter.
A closer look at this chart shows that the stock formed a golden cross as the 50-day and 200-day Exponential Moving Averages (EMA) crossed each other. A golden cross normally confirms a bullish breakout as it sends a signal that the short-term momentum is gaining steam.
Most importantly, the stock is slowly forming a cup-and-handle pattern whose upper side is at $8, and the lower side is at $4.36. The profit target in a C&H pattern is estimated by subtracting the lower side from the upper side. In this case, the difference is $3.65.
Adding this amount to the cup’s upper side brings the target to $11.65. A surge to that level is 70% from the current level. On the flip side, a move below the key support level at $5 will invalidate the bullish outlook.
Nio stock chart | Source: TradingView
Nio’s business is firing on all cylinders
Fundamentally, Nio’s business is tiring on all cylinders, even as the EV business faces major headwinds and some of the top companies slow.
Tesla, the most popular EV company, recently published weak delivery numbers, with the gap between production and deliveries soaring to 50k.
Similarly, BYD, the biggest EV company in China, also reported weak numbers, confirming that its business was slowing. Other top EV companies like Li Auto and XPeng are also struggling.
On the other hand, Nio’s vehicle deliveries have surged in the past few months. Its recent numbers showed that its vehicle deliveries soared by 136% to 34,486 in March, bringing the quarterly figure to 83,465. The company has now delivered over 1.081 million since its inception.
The company’s revenue jumped by 75% in the fourth quarter to over $4.95 billion, making it one of the fastest-growing companies in the industry. Its gross profit rose by 163%, while the net profit rose to $40 million. It was the first time that the company published a quarter profit.
Nio also ended the last quarter with a good balance sheet with over $6.6 billion in cash and short-term investments. This growth is expected to accelerate after the recent launch of the ES9 vehicle. Its ONVO L90 has also continued doing well, becoming the best-selling large BEV SUV last year.
Nio’s management believes that the company has more room to grow this year, helped by its investments across multiple brands and the potential for international growth.
For example, the company may target the Canadian market, where tariffs for Chinese EVs dropped from 100% to 6%. It is also aiming to gain share in other countries, including in Europe, Latin America, and Southeast Asia.
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