Nio stock price made a strong rebound this week as concerns about the company’s access to semiconductors eased. The shares rallied by more than 13% on Monday after a set of positive data from China. It soared to a high of $21.75, which was higher than last Friday’s low of $16.51, giving it a market cap of $31.6 billion.
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Nio is one of the biggest electric vehicle companies in the world. The company has a substantial market share in China, the biggest EV market in the world. Therefore, the stock has struggled this year as concerns about the weakness of the Chinese economy continues. Recent data show that the Chinese economy has weakened substantially, which explains why the PBoC has announced several rate cuts.
Nio stock price also declined after the US announced some product control recently. The country barred companies like Nvidia from selling important components to Chinese companies. This is notable since the company uses several chips such as the Drive Orin to power its cars.
Still, there are some positive reasons why the Nio share price is bouncing back. First, recent data shows that there is strong demand for electric vehicles in China. Data published on Friday revealed that auto sales in China rose by 32% YoY in August of this year. This increase was better than what analysts were expecting.
In the most recent quarter, Nio said that it delivered 25,069 cars in Q2, which was a 14% increase from the same quarter in 2021. This was a strong number since China went through several lockdowns in the quarter. At the same time, the cost of raw materials has been dropping lately. The prices of key metals like lithium, cobalt, and aluminum has been in a strong bearish trend lately.
A key challenge for Nio is the weak yuan. The USD/CNY price has jumped by more than 7% this year. Since Nio mostly sells its cars in China, the weak local currency could have an impact on its demand. Also, weak yuan has made the cost of imports much higher.
Nio stock price forecast
The four-hour chart shows that Nio share price has been in a strong bullish trend in the past two days. As it rose, the stock managed to move above the upper side of the descending channel shown in green. This is a positive sign for the stock. At the same time, it has moved above the 25-day and 50-day moving averages while the Awesome Oscillator has moved above the neutral level.
It has also formed an inverted head and shoulders pattern. Therefore, the stock will likely continue rising as bulls target the next key resistance level at $25, which is about 18% above the current level.