BYD Company Limited (HKEX: 1211) has solidified its position as the global leader in electric vehicle (EV) sales, capitalizing on the surging demand for battery-powered transportation. The world is witnessing a remarkable shift towards EVs to combat carbon emissions, and BYD has reaped the rewards, especially in its home market of China. Recent data highlights a staggering 36.2% surge in China’s sales of new energy vehicles (NEV) in 2023, reaching 7.74 million units. December alone saw a 47.3% year-over-year spike, with 945,000 NEVs sold.
BYD is set to make its mark in Indonesia next week, expanding its influence in the global EV landscape. Despite its undeniable success and significant market share, the company’s stock has faced a decline of over 11% in the past three months. This dip reflects market apprehensions regarding the pricing strategy for some of BYD’s models. The company recently engaged in a price war, reducing prices on its flagship models, adding an element of uncertainty to its financial outlook.
Moreover, concerns linger about BYD’s ability to sustain its impressive sales growth, especially after achieving a record-breaking 3 million unit sales in 2023. As investors ponder the implications of the recent stock depreciation, the question arises: does this downturn in share price present a potential opportunity for the EV giant to bounce back?
Technical
On the 1D chart, the share price is consolidating between 202.0 and 217.0 after a recent downtrend that has pushed the price below the 100-SMA (orange line), 50-SMA (blue line) and 25-SMA (green line). The momentum is favouring the bears, but with declining volumes, the selloff may be running out of steam.
Support at 202.0 is currently in the spotlight, as the share price could retest the consolidation range in search of a directional trend. If a breakdown occurs, the initial downtrend may be sustained, which could see the price trickle down toward 195.0 and 190.8. Neckline support is established at 186.5 if the selling momentum continues.
However, if support at 202.0 holds, the rectangle consolidation may hold. The 25-SMA resistance at 207.2 could prevent a bullish recovery, but if the price exceeds this level, the resistance at 217.0 could once again become a likely destination. Any movement above this level could trigger a run toward 222.0, where the 50-SMA converges with a strong resistance level.
Summary
After a downtrend that saw the share price close 11 consecutive days in the red, BYD Company Limited has entered a consolidation phase in search of direction. Support at 202.0 could be a focal point in the upcoming sessions to prevent the prior downtrend from intensifying into a fresh bearish run.
Sources: Koyfin, Tradingview, Reuters, BYD Company Limited
Piece written by Tiaan van Aswegen, Trive Financial Market Analyst
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