Shares of Nio Inc. sank Wednesday, after a report that discussions over a potential large new funding deal had been halted, with investors now leaning on a “bullish engulfing” stock price chart pattern to halt further declines to fresh record lows.

The National Business Daily (NBD) reported Tuesday that the China-based electric car maker was in talks with Wuxing District of Huzhou City in eastern China regarding an investment of over 5 billion renminbi, or more than $704.9 million at current exchange rates. Building a new factory in the district, with a capacity to manufacture 200,000 vehicles a year, would be part of the deal, the report said.

According to 36Kr.com, as translated by Google Translate, Nio Chief Executive Bin Li said Tuesday there was not much to disclose, but that Weilai, the Chinese name for Nio that means Blue Sky Coming, was in contact with many local governments.

The reports helped send the stock

NIO, -5.81%

 up 1.3% on Tuesday.

But on Wednesday, NBD reported that the talks had been called off, given the “heavy risks,” with no agreement of intent having been reached.

That sent the stock tumbling 5.8% in afternoon trading to the second-lowest ever close, only above the record closing low of $1.32 on Oct. 1.

Nio’s stock has now plunged 77% year to date, while U.S.-based rival Tesla Inc. shares

TSLA, +0.72%

 have shed 22% and the S&P 500 index

SPX, -0.20%

 has climbed 19%.

Also read: Nio shares gain after delivery numbers top outlook.

See related: Nio’s stock slips in volatile trading after Goldman cuts rating, slashes price target by 85%.

The selloff has brought the stock down into a key support zone on the charts, forged by a textbook, technical reversal pattern known to candlestick chart watchers as a “bullish engulfing.”

The bullish engulfing is a two-day pattern, in which a stock falls from the opening price to a record low close on the first day. On the second day, the stock opens below the first-day’s closing price, then rallies to close above the previous session’s opening price.

Don’t miss: 7 key candlestick reversal patterns.

The idea is that the pattern depicts a situation in which bears hit bulls with their best shot, and bulls survived to launch a successful counterattack that helped swing momentum to the upside.

Opening below the previous day’s intraday low, then closing above the previous intraday high suggests an even stronger counterattack.

According to candlestick charting guru Steve Nison, founder and chief executive of Candlecharts.com, support provided by the bullish engulfing remains intact until the stock closes below the lower boundary of the pattern, which for Nio’s stock is $1.19. Read more about Steve Nison.

Key resistance should start at the big gap in the chart created by the 20% plunge on Sept. 24, in which the intraday high of $2.24 is well below the Sept. 23 intraday low of $2.71. That fact this gap took the stock below previous support at the June 14 and June 17 identical intraday lows of $2.35, made it a “breakaway gap,” or break-down gap, which increased its bearish message to some chart watchers.

The idea of gap resistance is that those who bought Nio above the gap, and were left stunned by the gap down, would likely be happy to abandon those positions as the stock price approaches the break-down point.

The same goes for why previous support, once surpassed, morphs into resistance. Nison calls this phenomenon a “change of polarity,” as those who had bought as the stock declined, then watch the stock keep falling to new lows, may be happy to get out at breakeven. Read more about change of polarity.

The change also reflects that bears are likely willing to fight to maintain their new position of dominance.

That resistance area starts at the stop of the gap and the June lows, or 53% to 61% above current levels.