Nio stock price forecast: technicals point to a 40% upside

Nio (NYSE: NIO) stock price has bounced back in the past few days as investors react to the recent news from the company. After tumbling to a low of $7.38, the shares have jumped by ~38% to the current $10.

Nio is making improvements

Nio, a leading electric vehicle company, is making progress as the company attempts to implement a turnaround. Like other EVs, the company has lowered prices of its models in a bid to compete and boost sales. This price war, however, could be coming to an end after EV companies signed a pledge to end it.

Nio has also boosted its balance sheet by receiving funds from an Abu Dhabi company that will then own 7% of the company. This is an important move since the funding will cushion it from major shocks and give it access to a key market in the automobile industry. Also, the $740 million investment came at a time when Nio’s balance sheet was strong since it had over $5.5 billion in cash.

Meanwhile, the company’s deliveries have bounced back. It delivered 10,707 vehicles in June, a big rebound from the previous month. The company now hopes to deliver about 20k vehicles per month in the second half of the year. This will be a tough call, and as I wrote here, the company could still struggle to hit its target for this year.

Despite the progress, Nio faces some major headwinds in the coming months. For example, competition is still a major issue considering that companies like Li Auto, Tesla, and Xpeng are still gaining share. 

Further, it is still not clear whether the company will do well in the international markets, especially in Europe. There are also signs that the Chinese economy is not recovering as fast as expected.

Nio stock price forecast

NIO chart by TradingView

Is it safe to buy Nio shares? A quick look at the daily chart shows that the Nio share price formed a strong bottom at $7.38. It has failed to move below this level several times this year. Now, the stock has moved above the descending trendline shown in black.

Nio shares have also crossed the 50-day and 100-day moving averages and the 200-day EMA is approaching quickly. Therefore, I suspect that the stock will continue soaring as buyers target the next key resistance level at $14, the highest level in December. This price is about 40% above the current level.