Nio stock flags a rare bullish pattern as May vehicle deliveries jump

Nio (NYSE: NIO) stock price jumped on Monday, continuing a recovery that started late last month when it bottomed at $5.10. It jumped to a high of $6, its highest point since May 15 this year, helped by its strong vehicle delivery numbers. 

Nio’s deliveries are soaring

Nio Inc., one of China’s biggest electric vehicle company, has also become one of its fastest-growing ones in the industry. It demonstrated this view when it announced its May vehicle deliveries numbers.

The data showed that the company delivered 37,705 vehicles in May this year, up by 62.3% from the same period last year. It has now delivered 150,526 vehicles this year, up by 68.7% from the same period last year.

These numbers are important as competition in the Chinese electric car market has continued to accelerate in the past few years. Indeed, other popular Chinese EV companies published weak delivery numbers. XPeng’s deliveries rose by just 4% in May to 32,158, while Li Auto delivered 33,350 vehicles, down from 40,856 in the same period a year ago. 

Nio’s deliveries came a few weeks after the company announced its financial results, which showed that its growth was strong. Its revenue rose by 112% in the first quarter to $3.7 billion, higher than what analysts were expecting. It eked a gross profit of $704 million.

However, its stock retreated after the company made a net loss of over $48 million. It had surprised investors a few months earlier after reporting its first net profit in years. 

Wall Street analysts believe that Nio’s business will continue doing well in the coming years, helped by its strong brands and new vehicle launches. The average estimate is that its annual revenue will grow by 56% this year to 136 billion CNY ($18 billion) this year followed by $21 billion next year. 

Nio stock has formed a textbook cup-and-handle pattern

Nio share price chart | Source: TradingView

The daily chart shows that Nio’s shares have formed a textbook cup-and-handle pattern, a common bullish continuation sign. It is now in the process of forming the handle section of this pattern, which normally leads to a breakout. 

The upper side of this pattern is at $7, while the lower side is at $4.37, giving it a depth of $2.63. Adding this height to the cup’s upper side gives it a target of $9.63, which is about 60% above the current level. 

This view will be confirmed if it jumps above the key resistance level at $7. On the other hand, dropping below the lower side of the handle at $7 will invalidate the bullish outlook.

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