Interactive Investor

Chart of the week: has Nio turned the corner?

4th April 2022 11:49

John Burford from interactive investor

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.

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.

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