There has been no shortage of excuses driving Nio (NYSE:NIO) shares lower. But is it finally time for NIO stock investors to consider a more bullish road ahead rather than a bearish rearview mirror?
Nio looks great. Well, that is of course other than it being a Chinese electric vehicle play, a business with intense competition, a growth stock, as well as it having to deal with potential Covid-related challenges.
It’s a name that has come under fire after being one of 2020’s top performers on the NYSE. That year it brought home roughly 1,100% to NIO stock investors.
Today though, shares are down nearly 28% since the start of December. Worse and from last January’s all-time-high of $66.99, Nio has been chopped down by 56%.
But, again, the decline in NIO’s share price hasn’t been without cause. Still, with investors aggressively pricing in politicized delisting anxieties, supercharger fears from rival XPeng (NYSE:XPEV), inflation what-ifs and Covid-related bottlenecks, can NIO stock investors finally say “enough?”
Where NIO Stock Is Today
It actually depends on where Nio investors look. The company’s annual Nio Day this past month appears to support buying Nio on weakness.
Nio delivered in spades as it revealed its new ET5 mid-sized EV, which comes equipped with the most up-to-date NIO Autonomous Driving (NAD) technology. Management also offered a late January delivery date for its popular ET7 model, and it laid out global expansion plans into more than 25 countries by 2025.
But, as with other investors who haven’t been buying what Nio is optimistically selling, I’d advise against a purchase. After all, Nio is caught in the middle of a bearish trade war with no sure indications of letting up.
NIO Stock Monthly Price Chart
Source: Charts by TradingView
As I’ve been known to expound upon to investors, all stocks correct. Even the best of the best go through bearish cycles regularly before claiming fresh higher ground.
It’s during those phases when stock losses like Nio’s are piling up that being a contrarian and buying growth at a discount can make sense. And this type of strategy is particularly attractive when investors are able to locate a higher probability area for shares forging a meaningful technical bottom.
Today though, and aside from the challenges off the price chart, NIO stock’s price chart is still falling short of offering this type of opportunity.
Technically, and as the illustrated monthly view of Nio reveals, shares could be in the process of putting together a lower-low variation of a double-bottom pattern.
Also, with the potential formation developing just above Nio’s lifetime 62% retracement level, the chance for a bottom appears to be growing. But it’s also too early to consider a purchase.
At the moment an uncooperative and slower moving bearish stochastics setup warns the current double-bottom attempt is less likely to hold. And that could spell real trouble for today’s NIO stock buyers with the next band of Fibonacci and pattern-based support not coming into play until roughly $13.50 to $19.
Therefore, for the time being, steering clear of NIO stock continues to be a sensible trade decision.
On the date of publication, Chris Tyler did not have (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.
Chris Tyler is a former floor-based, derivatives market maker on the American and Pacific exchanges. For additional market insights and related musings, follow Chris on Twitter @Options_CAT and StockTwits.