An extremely bullish pattern is forming

Nio stock price rebounded strongly this week as concerns over the company’s access to semiconductors eased. Shares rebounded more than 13% on Monday after a string of positive data from China. It hit a high of $21.75, which was above last Friday’s low of $16.51, giving it a market capitalization of $31.6 billion.

InvestingCube S&R Levels

Are the challenges easing?

Nio is one of the largest electric vehicle companies in the world. The company has a substantial market share in China, the world’s largest electric vehicle market. As a result, the stock has struggled this year as concerns over China’s weak economy persist. Recent data shows that the Chinese economy has weakened considerably, which explains why the PBoC announced several rate cuts.

Nio’s share price also fell after the United States recently announced some control of the products. The country has banned companies like Nvidia from selling important components to Chinese companies. This is remarkable since the company uses several chips such as the Drive Orin to power its cars.

Still, there are some positive reasons why Nio’s stock price is bouncing back. First, recent data shows that there is a strong demand for electric vehicles in China. Data released on Friday showed auto sales in China were up 32% year-on-year in August this year. This increase is better than analysts expected.

During the last quarter, Nio said it delivered 25,069 cars in the second quarter, an increase of 14% compared to the same quarter in 2021. This is a high figure since China has experienced several blockages during of the quarter. At the same time, the cost of raw materials has been falling lately. The prices of key metals like lithium, cobalt and aluminum have been on a strong downward trend lately.

A major challenge for Nio is the weakness of the yuan. The USD/CNY price has jumped more than 7% this year. Since Nio primarily sells its cars in China, the weak local currency could impact its demand. Additionally, the weak yuan has made the cost of imports much higher.

Nio Share Price Forecast

The four-hour chart shows that Nio stock price has been on a strong bullish trend over the past two days. As it moved higher, the stock managed to move above the upper side of the descending channel shown in green. This is a positive sign for the title. At the same time, it crossed above the 25- and 50-day moving averages, while the Awesome Oscillator crossed above the neutral level.

It also formed an inverted head and shoulders pattern. Therefore, the stock is likely to continue rising as bulls target the next key resistance level at $25, which is around 18% above the current level.

Nio share price

Karen J. Nelson