• Covid restrictions have dampened demand and production in China.
  • Goldman Sachs has downgraded Chinese economic growth into 2023.
  • NIO stock collapsed 10.3% on Wednesday.

Nio (NIO) stock is once again making the best out of a bad situation. NIO shares have advanced 4.4% to $19.10 in Thursday morning after losing more than 10.3% on Wednesday to close at $18.30. While the Fed signaling that interest rates would be higher for longer sent US equities crashing on Wednesday, Nio was mostly dealing with a number of headwinds unrelated to the US central bank.

Also readMULN stock hits another all-time low, reverse split inevitable

Nio stock news

First, Goldman Sachs lowered its guidance on the Chinese economy for 2023. The main reason given was that the government in Beijing is now expected to continue its zero covid policy through a good part of next year. This has already resulted in lower output levels, a backed-up logistics industry, and inconsistent supply chains. Goldman now sees China's GDP next year achieving 4.5% growth, down from an earlier projection of 5.3%. At least this figure is still higher than the 3% expected in 2022.

Second, the semiconductor slump in China is continuing. China reported chip manufacturing fall by nearly 25% YoY in August. This comes after shrinking by 16.6% in July. Rarely does chip ouput fall two months in a row in China. This slump is thought to be affecting car companies like Nio, Xpeng (XPEV) and LiAuto (LI).

The strong US dollar is still a concern, but companies like Nio are not big exporters yet. If it was the stronger dollar would also potentially help its exports since it would artificially reduce the price of end products. Nio recently shipped a battery exchanging station to Germany, but the company remains in its early stages of foreign growth.

According to an article in The Wall Street Journal from earlier in the week, the China Passenger Car Association has reported that "new energy vehicles" comprised 30% of sales in August and would likely hit 55% of all sales on an annual basis by 2025. However, due to rising costs, Nio and other EV automakers would likely take longer to achieve profitability.

Nio stock forecast

Nio stock remains stuck in no-man's land. The stock is down 44% year to date. Since achieving its range high in late June with resistance at $24, NIO has dropped as low as $16.54 on September 7. The topline resistance seems harder to break than the bottom support line since NIO traded all the way to $11.67 on May 12.

NIO shares have not closed higher than $24.08 (June 24) since February 17, and that makes this area of resistance a necessity to overtake for any kind of longer-term bullish rally to unfold. For now, NIO seems destined to ricochet between $16.50 and $24 for some time until the carmaker reduces losses significantly, produces a higher growth profile or the dark clouds of a poor Chinese economy withdraw.

The Relative Strength Index (RSI) has not reached oversold or overbought levels since all the way back in May (four months ago!). This is yet another demonstration that the market is giving short shrift to either bearish or bullish narratives and instead has reduced Nio to a status quo stock. This is quite a distance from 2020 when Nio had its 1,200% breakout.

NIO stock chart shows more pronounced bearish angle after Wednesday 10% drop

NIO daily chart

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