NIO Correcting Cycle from All Time Low

Nio (NYSE: NIO) is a Chinese multinational automobile manufacturer with headquarter in Shanghai. It specializes in designing and developing electric vehicles. This year, the stock remains down over 40% from the January peak. Several factors contribute to the selloff. First of all, the shortage in the semiconductor limits the production in auto industry. The current chip shortage causes the company’s deliveries to fall by -2% month over month. However, the company recently suggests the chip’s situation may get better around June or July.

The second factor is the mounting competition in China’s electric vehicle market. China-based manufacturers now account for over 50% of global EV deliveries. Nio tries to distinguish itself by innovating in two key areas which are battery technology and self-driving software. The company offers modular batteries for an easy swap in minutes. It also offers Battery-as-a-Service (BaaS) which allows customers to subscribe for car batteries rather than paying for them upfront.

Another factor is simply profit taking and healthy pullback after a massive rally. Rising inflation causes investors to rotate out of the high valuation growth stocks. In the charts below, we will take a look at the Elliott Wave outlook for the stock.

NIO Weekly Elliott Wave Analysis – 05.31.2021

Weekly Chart above suggests that NIO has ended cycle from all-time low. The stock is now correcting cycle from all-time low within wave ((II)) in larger degree 3, 7, or 11 swing. The first leg of the correction wave (A) ended at $31.91, and now is in wave (B) as expanded flat before possibly turning lower again in wave (C). As far as the pullback stays above 1.37, expect the stock to extend higher.

NIO Daily Elliott Wave Analysis – 05.31.2021

Daily chart above suggests that the stock could see further rally in near term within wave (B) to correct cycle from January 11, 2021 peak. However, as far as the rally stays below January 11 peak (67), we can’t rule out another leg lower in wave (C) of ((II)).