Had non-stop electric car startup shares
recently. Stocks are up again in Monday’s trading session, leaving investors wondering what caused the surge and where the stock might go.
In afternoon trading, Rivian stock (ticker: RIVN) rose 2.6% to $25.36. The
up 0.2% and
rose 0.1%. Shares of Rivian have rallied for nine straight trading sessions, up nearly 90% in that time period. It was a spectacular move.
The current record competes with the running of
stocks (TSLA), rose for 13 consecutive days starting at the end of May. The stock has increased by 41% in that period.
All it seems to have taken is solid production results and short-term interest rates are very high, which indicates that a significant amount of money is betting on the stock going down. Short selling stocks means that a pessimistic investor borrows stocks and sells them immediately. The investor hopes to later buy the stock at a cheaper price in the market and return it to the lender.
The short interest in Rivian is around 12% — the percentage of shares available for trading allotted to the bearish bets — roughly equal to record high. The average short-selling interest rate on an S&P 500 stock is less than 2%, according to data compiled by Bloomberg.
High short-term interest rates can create a short-term squeeze, which occurs when stock prices rise. A bearer who has borrowed shares may be required by the lender to immediately replace some of the borrowed shares. A large number of bears being forced to buy shares to replace some borrowed shares would drive the stock price even higher, leaving even more investors to cover their investments. their discount bets.
“Rivian is one of the biggest pressure stocks in the US,” said Ihor Dusaniwsky, managing director of short-selling data provider S3 Partners. He is drawing his conclusions based on a combination of factors, including the amount of money short sellers have recently lost.
Dusaniwsky doesn’t consider Rivian production, but that also helps squeeze supply. Earlier this month, Rivian said it built 13,992 electric vehicles in the second quarter, beating Wall Street estimates of about 11,000. Furthermore, if Rivian can deliver similar numbers in Q3 and Q4, the company will surpass its own target of 50,000 units for 2023. (Rivian produced 9,395 units in the first quarter. )
That’s why the price is up, but how far can Rivian stock go?
“The momentum is undeniably positive, but it has created a very tense short-term condition,” said CappThesis founder and technical analyst. Frank Cappelleri tell Barron’s.
He calls stocks overbought. That means the stock has risen a lot, quickly, and is a signal to traders that a stock may soon run dry. He sees some resistance at $28, “also the site of [shares] December 2022 incident area.”
Shares started falling in December and hit $11.68 on April 26.
A short-term profit of $28 isn’t very appealing to Cappelleri, but he makes no fundamental call for the company. He is reading stock charts to see where traders might decide to buy or sell. In the long run, Rivian’s production and earnings will determine where the stock price will go.
It is always difficult for investors to predict a change in sentiment. It is easy to recognize when looking in the rearview mirror. And investors are clearly feeling better about Rivian stock these days.
Wedbush analyst Dan Ives said in an email: “Rivian has turned the tables and production is now surging with bears going into hibernation. “Cheap stock for a disruptive technology company and now investors [are] piled in. He has a Buy rating on Rivian stock with a target price of $30.
To be sure, all recent purchases cannot be calculated by just offsetting a short position. Ives also sees more optimism from investors.
Write to Al Root at [email protected]