The market is plagued with bearish skepticism. And almost nowhere is that more evident than in Nio (NYSE:NIO) stock.
Moving forward, many investors now question whether NIO stock is worth a buy or if it setting up for an even greater crash. Let’s take a closer look to determine how investors should proceed with NIO today.
Monday was another ugly one for most stocks. The broad-based, large-cap S&P 500 finished off by 0.74% and less than 2% from its corrective low set in February. And worse for many investors, the tech-heavy Nasdaq fell just over 2% while undercutting its bear market low of 23% by a menacing whisker.
Larger losses in high profile influencers Amazon (NASDAQ:AMZN), Alphabet (NASDAQ:GOOG, NASDAQ:GOOGL) and Tesla (NASDAQ:TSLA) tied to the Russia-Ukraine conflict and general anxiousness in front of the Federal Reserve’s first interest rate hike in three years later this week have played a role in the selloff.
Nio Suffers Amid Broader Market Turmoil
But there was another drag weighing on investors, which incidentally hit even closer to home for NIO stock.
Shenzhen, the largest city in manufacturing intensive province of Guangdong, announced the temporary suspension of businesses amid the worst outbreak of Covid-19 in China since 2020.
The shutdown won’t impact Nio’s electric vehicle operations directly. But unlike Las Vegas, what happens in China, doesn’t stay in China as businesses and global citizens have come to realize the last couple years.
The bad news in NIO stock didn’t stop there either.
Compounding matters for Nio investors, Russia’s plea to China for military equipment and economic assistance is another worry for investors in Chinese stocks, as these companies already face U.S. listing challenges and scrutiny from regulators.
News from Tencent Holdings (OTCMKTS:TCEHY) didn’t help matters for NIO either. The diversified Chinese tech giant is facing fines tied to anti-money laundering violations and failure to comply with other business regulations.
Could it possibly get any worse for Nio? Arguably, it could.
A Closer Look at NIO Stock
However, if NIO stock investors are allowed just a glimmer of sunlight, bearish deluges like Monday’s aren’t the new normal. Monday’s 12.26% plunge in NIO looks like a case of investors throwing the baby out with the bathwater.
Sure, uncertainty is a fearful fixture in the market these days. But the shoot first, ask questions later crowd is working increasingly with blanks.
For one, Nio isn’t TCECHY stock. And rather than exhibiting any bad behavior, NIO has passed two years of listing requirements without a hitch and abided by the letter of law per U.S. regulators.
Also, an old-fashioned, fundamental-driven tire kicking from InvestorPlace’s Mark Hake forecasts much sunnier days ahead. His analysis supports NIO stock to be worth nearly $34 a share based on the EV company’s record low price-to-sales multiple of less than three times 2022 revenue forecasts of $10 billion.
Mark isn’t alone either. Analysts from JPMorgan, CSLA and Citi see upside of $30 to as much as $87 in Nio.
The bullish to incredibly positive price targets are supported by Nio’s battery-swapping model, premium pricing and EV market penetration expectations, new wheels hitting the pavement in 2022 and attractive cash flow.
Lastly, there’s NIO stock’s price chart which may be close to helping analysts with their upbeat forecasts and investors with a solid nearby purchase.
Positive Indicators on NIO’s Monthly Price Chart
Source: Charts by TradingView
All stocks correct, and NIO’s year-to-date slide of 55% (as well as its 79% crash since January 2021) certainly qualifies. Cycles also end.
Today, Nio’s bear market is setting up as a buy given the company’s longer-term growth narrative and current prices on its stock chart.
Technically, shares are now testing the lower boundary of a key support area from about $13.50 to $19.
Backed by monthly Bollinger support, Nio’s Covid-related 76% retracement level, a Fibonacci-based two-step completion and 2020’s massive cup-shaped breakout, there are plenty of reasons to be positive on NIO stock at current prices.
That said, I’d still err on the side of caution.
Right now, waiting for that other bottom-line to come into play makes sense. I’m not referring to earnings later this month, but rather NIO’s oversold and flattening stochastics indicator that’s below the price action in the secondary window.
Should shares continue to hold above some allowable wiggle room north of $13 while signaling a bullish crossover, going long NIO stock makes for a more sound buy decision.
Still, and with earnings out in late March, I’d favor a test drive of sorts in a slightly out-of-the-money April bull call spread to gain superior leverage while avoiding possible “crash test dummy” challenges later down the road.
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.