NIO Stock News and Forecast: Three reasons to be bullish again on NIO and why did it bounce?

• NIO stages a strong recovery on Wednesday as the early trade was ugly.
• NIO bounced hard in the afternoon to shed losses.
• The Chinese electric vehicle maker bounced perfectly from the 200-day moving average.

Why did NIO stock drop yesterday?

NIO stock staged a nice recovery during the second half of Thursday's session. The early part of the day was one to forget as NIO stock dropped sharply as the overall market was strongly negative. Sentiment had turned on worries over the Delta variant, and more specifically NIO was hurt on the negative read-across from DIDI. Chinese stocks have been in the spotlight for the wrong reasons as China appears to heighten its regulatory crackdown. NIO opened straight down 6% and looked like it was going to smash through our $42 support area. The 200-day moving average at $42.50 though held the bears at bay and a remarkable 5% rally ensued as NIO finished at $45.60 and lost less than 1% on the day. We had identified this $42 area as our support but had cautioned that the zone around $35 was stronger. Those of you with strong stomachs who got in near the lows at just above $42, well played.

NIO statistics

Why did NIO stock go up?

NIO had been steadily appreciating since dropping to nearly $30 in May. Since then, the shares gradually appreciated in line with most sector peers as Tesla in particular put in a solid June. NIO shares are up over 23% in the last month, so the setback has to be taken into context. Recent delivery numbers from all Chinese electric vehicle manufacturers were strong. LiAuto (LI) posted record June deliveries, up 166% YoY. XPeng (XPEV) posted a 439% yearly gain in deliveries, while NIO itself posted a yearly gain of nearly 116%. BYD (BYDDF), the Warren Buffet-backed Chinese electric vehicle maker, saw its June sales rise 102% YoY. Tesla (TSLA) also produced record deliveries of over 200,000 vehicles for the first quarter of 2021. Hence, all electric vehicle manufacturers seem to be hitting record numbers despite global semiconductor chip issues. 

Three reasons to be bullish on NIO stock

1. Overall, markets are now back on happier ground. European markets are up on Friday and so are US futures. Worries have been parked for now.

2. Chinese bad news is now factored in. The DIDI saga is not welcome but at least is now known and discounted. Investors have repositioned. 

3. NIO held the 200-day support almost perfectly, a bullish move. As long as this holds, NIO can look higher.

Now let us not get too excited. One rally does not kill off the bears, but the signs are looking better than this time yesterday. The first target for NIO is the 21-day moving average at $46.54, then the 9-day at $48.03. This $48 zone is important. It is the high from June 18, and also above $48 the volume profile thins out quickly, meaning less resistance. Below $48 is heavy traffic, so any move higher is harder. Getting back above $48 puts a new test of the key $54.86 level firmly back on target.

Some caution needs to be taken from the crossover in the Moving Average Convergence Divergence (MACD) yesterday. Ideally we would like to see this reverse pretty quickly to help our bullish case.