Nio has more downside to come as high growth sector to remain weak

• Nio stock falls yet again on Thursday, by 9% this time.
• NIO looks set to break key support at the $19.31 level.
• More losses are likely for NIO as environment risk assets suffer.

Another bad day for Nio stock saw it collapse by nearly 9% on Thursday. Nio has not put in three consecutive down days as the market once again heads for the hills and risk assets suffer. This is not all that surprising given the macroeconomic backdrop. We cannot avoid the threats of rising inflation, rising interest rates, the effects of Russian sanctions on global growth, soaring energy costs and a worsening geopolitical backdrop. Some have tried to stand up for the EV sector based on those soaring oil prices, but while that may push consumers into a swifter transfer toward electric vehicles it still pushes up input costs for electric vehicle makers. Shipping costs are going through the roof, and all aspects of global supply chains will see price pressures. 

Nio Stock News

The main problem for Nio in the current environment is that it is still in its growth phase. Growth stocks need a relatively benign macroeconomic environment to thrive. Basically, they need 2020 and 2021 all over again. That is not going to happen. Many EV stocks will fail in the current environment unless things change rapidly. Higher costs and more competition for inputs mean only the strongest will survive. Nio has a better than average chance in my view as it operates in the biggest electric vehicle market in the world, and China does have strong policies to boost EV adoption. Will Nio even survive competition from its own Chinese competitors though?

Data just out from BYD (BYDDF) shows that it sold significantly more vehicles in February than Nio. BYD sold 43,173 EVs in February, a fall of 7% in January due to February having basically three weeks of sales data due to the Chinese Lunar New Year. Sales are up 451% from February of last year though, according to Benzinga. For comparison, Nio sold 6,131 vehicles in February. BYD is backed by Warren Buffet's Berkshire Hathaway. 

Nio also had news of a debt offering late on Thursday. Benzinga cites CnEVPost as reporting that Nio's leasing subsidiary has raised just over 1 billion yuan ($163 million) through a note issuance in China. Nio stock is currently indicating nearly 2.5% lower in Friday's premarket.

Nio Stock Forecast

Breaking $19.39 could see a sharp move lower as Nio enters a volume gap down to $15. The trend remains strongly negative with a declining Relative Strength Index (RSI) and Moving Average Convergence Divergence (MACD). Only breaking $27.34 ends the current bearish setup. 

NIO stock chart, daily

On the more short-term, intraday chart, we can see the importance of this support at $19.31. Volume dries up below. Resistance is at $21 from yesterday's volume profile and then breaking $23.25 would open the chance for a move to test $27.34. However, we deem this unlikely any time soon. 

NIO stock chart, 15 minute

The author is long NIO