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NIO May Be Losing a Key Level of Support After Earnings

NIO is taking a tumble after earnings, putting a key level of support to the test. Here's where the stock could go if it fails.

Is the EV trade over with? NIO  (NIO) - Get NIO Inc. American depositary shares each representing one Class A Report certainly isn’t helping sentiment, down more than 11% on Tuesday.

It doesn’t help that shares have been hanging near the session low and failing to hold a prior level of support. Or that the decline is coming after earnings.

While revenue scorched higher by 133%, it slightly missed consensus expectations. So too did the bottom-line results, with the company reporting a  loss of 0.16 renminbi a share, wider than analysts' expectations.

Although the results were good, they were weaker than expected and for a stock that’s been as strong as NIO the quarter had to be robust.

That’s even with the recent pullback. Shares have fallen about 33% from the all-time high and declined in 10 of the 13 sessions leading up to earnings.

The results are impacting Tesla  (TSLA) - Get Tesla Inc. Report too, which was down about 2.5% on the news. From its highs, Tesla is down notably too, lower by 22%.

Trading NIO

Daily chart of NIO stock.

Daily chart of NIO stock.

Tuesday’s close will be important for NIO. Earlier I mentioned that the stock is failing to hold a prior level of support, which is why the close will be so important to see if it can be reclaimed before the session ends. 

Last week had a couple of vital tests for the 100-day moving average. On one of those occasions — on Feb. 23 — NIO broke well below the 100-day before snapping back and closing notably above it.

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A few days later, we saw another “bend but don’t break” reaction to this moving average. 

Thus far, Tuesday looks more like a break of the 100-day moving average. Moving forward, this level may become important.

For instance, should NIO close below the 100-day on Tuesday, does it snap back on Wednesday? If so, does the stock reclaim this mark or do bears make a stand and allow this level to act as resistance?

These are all questions traders will be looking for answers to in the coming days.

If the 100-day is reclaimed, we need to see the NIO stock push through the 10-day moving average, which has been resistance.

Above $50 and the 10-day moving average, puts $54 and the 50-day moving average in play.

If the 100-day is not reclaimed, last week’s low quickly comes into focus, at $41.66.

Below that mark and the $40 area is on watch. This level was solid support in Q4 and an area we have yet to test in Q1. Should NIO get there, it should at least be good for a bounce.

If it ultimately fails, it will have investors wondering if a test of the 200-day moving average could be in the cards.