Nio stock builds a bullish pattern into earnings as BYD issues major EV warning

Nio stock has crashed in the past few months, erasing billions of dollars in value, even as its delivery growth has accelerated. It has now stalled at a crucial support level and has formed a highly bullish chart pattern ahead of its earnings report on Tuesday, September 1.

Nio stock in the spotlight after a major BYD earnings

Nio, a top Chinese EV company, will be in the spotlight this week as it releases its results, which are expected to show strong revenue growth.

Its recent delivery numbers showed that the company delivered 107,658 vehicles in the second quarter, up by nearly 50% from the same period last year. Its June deliveries rose by 62.9% to 40,597.

This growth continued into the third quarter as the company delivered 35,934 vehicles in July. Its July deliveries were up by 71% from the same period last year.

Therefore, Yahoo Finance data shows that analysts expect the upcoming earnings report will show that its revenue jumped by 75% to 33.28 billion yuan. In reality, chances are that its report will show that its revenue rose to over 35 billion yuan. Historically, the company tends to report stronger-than-expected revenue figures.

Investors will pay close attention to the company’s profitability metrics in this report. Its last report showed that its net loss stood at over $40 million in the first quarter, a big reversal after it made a profit in the fourth quarter. A profit or a smaller loss will be bullish for the stock.

Still, BYD, the biggest Chinese EV company, delivered a major warning in its earnings report last week. In a statement, the management said that the Chinese auto sector faced sluggish growth as the economy slows. It is also experiencing fierce competition and rising raw materials and chip costs that are affecting their margins.

Companies, including Nio, are offsetting the weaker domestic demand by boosting their exports. The top export markets are in the Southeast Asia region and Europe. Some companies have also started exporting to Canada, a country that slashed its EV tariffs.

Nio stock chart | Source: TradingView

Technicals suggest that Nio’s shares will continue falling after it releases its financial results this week. For one, it has remained below all moving averages, a sign that bears have prevailed.

The stock has also moved to the important support level of $4.37, its lowest level in February and March last year. A clear move below this level would be a sign that bears have prevailed, pointing to more downside.

On the other hand, the stock has formed a bullish divergence pattern as the Percentage Price Oscillator (PPO) has drifted upwards. The stock has also formed a falling wedge pattern, which is made up of two descending and converging trendlines. This pattern normally leads to a reversal.

Therefore, the stock may rebound after earnings as investors target the key resistance level of $5, its highest level on July 31.