Nio (NIO) - Get Report shares were obliterated on Tuesday, falling 20.4% and closing at $2.16 on the day.

The stock is hitting new all-time lows in the process, as investors race to dump Nio. Shares are declining after the company reported worse-than-expected quarterly results.

Called the "Tesla (TSLA) - Get Report of China" during its IPO about a year ago, it's done anything but live up to the hype.

In its most recent quarter, Nio reported fiscal second-quarter earnings of -3.11 RMB per share, badly missing expectations by 1.24 RMB per share. Further, while revenue grew year-over-year, sales sank more than 7% sequentially. Nio is also looking to cut its workforce by more than 20%, while margins continue to erode considerably.

In short, the situation at Nio is a complete disaster, and it's no wonder investors have shown little faith in the stock over the last few months.

Nio stock is down 20% in the past three months and more than 62% over the last six. Over the last year, shares have fallen more than 75%, while Nio is down more than 80% from its 52-week highs made in February. 

Trading Nio Stock

Daily chart of Nio stock.

Seeing hideous numbers like that doesn't make me want to scoop up Nio stock on the cheap. In fact, it makes me want to do the opposite and run as far away from it as I can.

Investing with a bias can get investors hurt -- leaving them blind to both losses and opportunity risks. However, when a stock is toxic, it's almost always better to let the dust settle. That's particularly true when it's below $5 per share.

The action is pretty coiled on the chart above, but I had to include the price action over the last year to highlight just how ugly of a run it has been.

As you can see above, Nio stock did a great job breaking out over downtrend resistance (blue line) after holding support near $2.50 (black line). However, shares are back below both marks now as bulls try desperately to keep Nio above $2 per share.

That's not the kind of setup bulls should want to buy; they want the wind at their back, not blowing directly in their face.

From here, we need to see if Nio stock can rally back to $2.50. If it reclaims this key mark, a run to its 50-day moving average currently near $3.11 may be in the cards. If $2.50 is resistance, though, Nio will have a difficult time rallying in the short and intermediate term.

Below $2 is big trouble for Nio stock.

This article is commentary by an independent contributor. At the time of publication, the author had no positions in the stocks mentioned.