By The shares of electric-vehicle start-up Rivian Automotive have been on an unstoppable rise in recent days, leaving investors intrigued by the sudden surge and uncertain about the stock’s potential trajectory.
Rivian stock (ticker: RIVN) has climbed 2.3% to $25.25 in midday trading on Monday. In contrast, the S&P 500 remains flat, while the Nasdaq Composite is down 0.3%. Remarkably, Rivian shares have been on the rise for nine consecutive trading sessions, experiencing a staggering 88% increase over this period.
This impressive streak is reminiscent of Tesla stock (TSLA), which enjoyed a 13-day surge in late May resulting in a 41% gain.
So, what has fueled this remarkable rally? It appears that solid production results and significant short interest have played pivotal roles. The unusually high short interest indicates that a substantial amount of money has been wagered on the stock’s decline. When investors sell stock short, they borrow shares and sell them immediately with the aim of repurchasing them at a lower price later on to return them to the lender.
Rivian’s short interest currently stands at approximately 12%, close to a record high. In comparison, the average short interest for an S&P 500 stock is less than 2%, as per Bloomberg data.
High short interest has the potential to trigger a short squeeze, whereby an increase in share price prompts the bearish investors who borrowed the shares to replenish them immediately. If a critical mass of bearish investors is forced to buy the stock to replace their borrowed shares, it would drive the stock price even higher and compel more investors to cover their bearish bets.
As Rivian continues its upwards trajectory, investors wait with bated breath to see how this story unfolds.
Rivian Surpasses Production Estimates, Showing Positive Momentum
Earlier this month, Rivian exceeded expectations by producing 13,992 electric vehicles (EVs) in the second quarter, surpassing Wall Street’s estimate of 11,000 units. With this impressive performance, Rivian has the potential to surpass its own guidance of producing 50,000 units in 2023. It’s worth noting that Rivian had already produced 9,395 units in the first quarter.
This strong performance has garnered attention and positive momentum for Rivian’s stock. However, some experts warn that the stock may be overbought and caution traders about its short-term condition.
Frank Cappelleri, founder and technical analyst at CappThesis, acknowledges the extreme positive momentum but believes the stock is currently overbought. He points out that the stock has experienced rapid growth and identifies potential resistance at $28, which coincides with the breakdown zone observed in December 2022.
Despite this cautionary note, Cappelleri does not make a fundamental judgment on the company itself. Instead, he analyzes stock charts to anticipate traders’ buying or selling decisions. Ultimately, Rivian’s production capabilities and earnings will determine its long-term trajectory.
While predicting changes in investor sentiment is challenging, recent trends indicate increased confidence in Rivian stock. Wedbush analyst Dan Ives observes that Rivian has turned the corner with production now ramping up, resulting in decreased bearish sentiment. He further emphasizes that Rivian’s stock is attractively priced for a disruptive tech player, and investors are taking notice.
It’s important to note that the recent surge in buying activity cannot solely be attributed to short position covering. Ives believes there is genuine optimism among investors, contributing to the current momentum.
In conclusion, Rivian’s impressive production numbers have sparked positive momentum for its stock. However, experts warn of potential short-term challenges due to the stock’s overbought state. Analysts will closely monitor Rivian’s future production and earnings to gauge its long-term performance.
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