Technical analyst John Burford questions whether this Chinese EV company has reached the light at the end of the tunnel.
Pic credit: shot by NIO App user @EdisonAcu
Shares in this Chinese EV start-up have suffered badly in recent months. From the initial excitement surrounding all things EV in 2020, reality struck in January 2021 when profits (if any) seemed long into the future and the shares began a relentless descent from the $68 high to the 16 March low of $16.
But with last Friday's news that the company had made a significant increase in deliveries compared with those made this time last year, shares bounced off the lows. So, could this be the light at the end of the tunnel for NIO (NYSE:NIO)?
Chinese tech has been hit very hard this year. Many Chinese companies are traded in the US on ADRs (American Depository Receipts) and must comply with US auditing standards to remain listed. However, their auditing standards are not necessarily an accurate reflection of the state of their businesses. Historically, US investors have cast a somewhat jaundiced eye on their company reports.
- Shares, funds and trusts for your ISA in 2022
- Why reading charts can help you become a better investor
But last week, the Chinese authorities announced that now, for the first time, they are to give US authorities full access to auditing reports. That should help remove at least some barriers to US investors and keep the ADRs listed on US exchanges.
Here is the sorry saga in the daily chart:
Past performance is not a guide to future performance.
The decline has the clear shape of a three (corrective to the main trend) and with the break above my small degree tramlines, odds are increasing that we have seen the lows.
And this morning (Monday), the ADRs are catching a bid as news spreads of the above positive developments.
Of course, many investors are wishing for another Tesla (NASDAQ:TSLA) to provide them with a skyrocket, but even if the Tesla phenomenon is not on the cards, EV shares may go some way in that direction.
I am adding this to my buy low/sell high list with only a move below the $14 low prompting a re-evaluation. My first target is the upper tramline around $32 with higher potential.
John Burford is a freelance contributor and not a direct employee of interactive investor.
These articles are provided for information purposes only. Occasionally, an opinion about whether to buy or sell a specific investment may be provided by third parties. The content is not intended to be a personal recommendation to buy or sell any financial instrument or product, or to adopt any investment strategy as it is not provided based on an assessment of your investing knowledge and experience, your financial situation or your investment objectives. The value of your investments, and the income derived from them, may go down as well as up. You may not get back all the money that you invest. The investments referred to in this article may not be suitable for all investors, and if in doubt, an investor should seek advice from a qualified investment adviser.
Full performance can be found on the company or index summary page on the interactive investor website. Simply click on the company's or index name highlighted in the article.
We use a combination of fundamental and technical analysis in forming our view as to the valuation and prospects of an investment. Where relevant we have set out those particular matters we think are important in the above article, but further detail can be found here.
Please note that our article on this investment should not be considered to be a regular publication.
Details of all recommendations issued by ii during the previous 12-month period can be found here.
ii adheres to a strict code of conduct. Contributors may hold shares or have other interests in companies included in these portfolios, which could create a conflict of interests. Contributors intending to write about any financial instruments in which they have an interest are required to disclose such interest to ii and in the article itself. ii will at all times consider whether such interest impairs the objectivity of the recommendation.
In addition, individuals involved in the production of investment articles are subject to a personal account dealing restriction, which prevents them from placing a transaction in the specified instrument(s) for a period before and for five working days after such publication. This is to avoid personal interests conflicting with the interests of the recipients of those investment articles.