PreMarket Prep Stock Of The Day: Li Auto

Benzinga's PreMarket Prep airs every morning from 8-9 a.m. ET. During that fast-paced, highly informative hour, traders and investors tune in to get the major news of the day, the catalysts behind those moves and the corresponding price action for the upcoming session.

On any given day, the show will cover at least 20 stocks determined by co-hosts Joel Elconin and Dennis Dick along with producer Spencer Israel.

It seems on a daily basis that U.S. investors are greeted with either some bad macroeconomic news out of China, some negative stock or sector-specific news or both. On Monday, investors in the Chinese electric vehicle manufacturer Li Auto Inc LI had to deal with the double whammy.

Not only are there global concerns over the debt accumulated by China’s largest real estate company, Evergrande Realty, but the company had some additional bad news for investors. The price action instigated by these events makes Li Auto the PreMarket Prep Stock of the Day.

Li Auto's Rough August, September: Ahead of the stock-specific negative news on the issue, Li Auto has been volatile over the last month-and-a-half. After ending July at $33.39, on the first day of August, the issue rallied to $35.33, but was unable to hold that elevated level and retreated to close at $33.68.

That decline did not end until it bottomed Aug. 17 at $26.91. The rebound off that low was capped on Sept. 2 ($31.78). It made an attempt to improve on that high but came up just shy on Sept. 10, when that rally stalled at $31.63.

Heading into Monday’s session, it was lower in four of the last five sessions, nudging the issue as low as $28.53 on Thursday, but had a slight boost to end the week at $29.09.

Li's 'Bad' News: Along with the pressure on Chinese stocks, due to the precarious state of Evergrande Realty, the company lowered expectations for deliveries of its vehicles.

Before the open, the company said that due to the COVID-19 pandemic in Malaysia, the production of chips dedicated to the company's millimeter-wave radar supplier has been severely hampered.

As the recovery of the chip supply has been slower than expected, the company now expects its vehicle deliveries to be approximately 24,500 vehicles for the third quarter of 2021, a revision from the previous outlook of between 25,000 and 26,000 units.

PreMarket Prep's Take On Li Auto: When the issue was being covered on Monday’s show, it was trading at the $27.40 area. The author of this article identified possible support in the $27 area. The reason: the issue had a pair of lows in that area from Aug. 16 ($27.21) and Aug. 17 ($26.91) that provided the foundation for the relief rally back to the $32 area.

Beyond those lows, the next daily support level is down at its July 27 low ($26.22).

The discussion on the issue from Monday’s show can be found here:

LI Price Action: After a much lower open ($27.81 vs. $29.09), the issue only had a slight bounce to $27.87 and resumed its move lower. It has continued to make new lows for the session and breached the pair of lows at the $27 area.

As of 2:15 PM EST, in had fallen under $27 and continued to tick lower toward its recent low for the move.

The stock ultimatately lost 7.49% Monday, closing at $26.91.