Will Nio's May Deliveries Update Help Maintain Stock's Upward Trend?

NIO Inc. - ADR NIO stock, which has been locked in a lackluster phase ever since it reached an all-time high in mid-January, showed signs of breaking out this week.

Nio On an Intermediate-Term Uptrend: Nio bottomed at $30.71 May 13, the lowest since Oct. 30, when it settled at $30.03. The pullback brought in bargain hunters, who helped lift the stock from the depressed level.

The reversal seen subsequently came with intermittent short retreats. The momentum picked up nicely after the stock broke above a resistance area around $35.51, where it had previously completed a triple bottom formation.

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The rally accelerated this week, with the stock closing higher in each of the three sessions thus far in the week. Broader market strength has helped in part.

The technical picture looks promising. Nio has moved above the 50-day moving average in the year-to-date chart. In another bullish signal, the shorter-term 50-day moving average has climbed above the longer-term 200-day moving average.

One concern is the fact that the uptrend hasn't been accompanied by robust volume. The day the stock bottomed in mid-May about 11.4 million shares exchanged hands. This compares to the average volume of about 6.65 million from Monday through Wednesday.

This may have to do with the light volume associated with pre-holiday trading.

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Nio's Fundamentals and Stock Diverge: The lackluster phase evident in Nio's shares has come despite fairly strong quarterly results and deliveries reported by the company during the said period.

The company has had several positive headlines regarding new products, services and international expansion.

The next catalyst could be Nio's May deliveries update, which in all likelihood could be announced June 1. Although Nio is not in habit of giving guidance for monthly numbers, it did suggest in its first-quarter earnings report that it expects second-quarter deliveries to come in at 21,000 to 22,000.

For April, the company reported deliveries of 7,102 vehicles, which suggests the monthly rate for June and July should be in line with April to meet or exceed the guidance.

Chip supply constraints have reduced visibility into May's numbers. Despite stopping production for two days in April on account of the chip shortage, Nio managed to report about 125% year-over-year growth in deliveries for the month.

If the stock can sustain the upward momentum in the run-up to and through the data release, it is likely it can successfully challenge the next upside resistance around the $41.50 to $42.50 area.

At last check, Nio shares were up 1.76% at $38.42.

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(Photo: Nio)