Will NIO Inc drop 20% to a major technical support zone?

Marec 03, 2021 12:00

NIO Inc shares have been against the ropes this month after posting a disappointing fourth-quarter earnings report. The Chinese electric car manufacturer reported revenues of $1 billion which missed analyst estimates. 

It’s only been one year since the company was saved from bankruptcy by a government cash injection. While the electric car maker produced and delivered a record amount of vehicles, investors have been banking profits after the more than 1,000% surge higher last year.   

In the daily chart below, it’s clear to see the huge surge higher over the coronavirus pandemic period last year. However, so far this year, investors have exited the stock in a big way. From the earnings announcement at the beginning of the month, the price is already down more than 10%. 

Source: Admiral Markets MetaTrader 5, #NIO.US, Daily - Data range: from May 19, 2020, to Mar 2, 2021, performed on Mar 2, 2021, at 8:30 pm GMT. Please note: Past performance is not a reliable indicator of future results. Last five-year data not available. 

If the price can keep pushing lower, it may reach technical support at the horizontal line at ~ $39.16 which would mark a more than 20% fall from the beginning of the month. This area could also prove to be a buy zone for any long-term investors trying to build a position once again. 

Currently, global stock markets are treading cautiously after a huge surge higher in bond yields at the end of February. This has caused fear from investors that borrowing costs for companies may rise, thereby hurting company profits. However, the fall in stock markets could provide interesting opportunities for long-term value investors. 

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