RIVN almost ready to dump??
I'm doing something different with this post from my typical MO. I like simple charts with an over abundance of confirmation. This chart is slightly more complex, layering in stochastic in the 50d MA as well as the fibs for the most recent downward run. The extra complexity is needed in this example because it builds a trifecta of technical indicators on top of an already overpriced stock.
Let's quickly look at why RIVN is where it is today.
It is my opinion that the most recent bounce is 100% technical and not institutional buy and holders that will elevate the price long-term. Given that operational risk is exceptionally high - that is, to meet the current valuation the company will have to meet or exceed growth targets for the next 7-8 years (minimum) - the value of the company right now is primarily driven by the amount of cash in the bank. Every day that the company operates it should intrinsically be worth $50 million less (assuming they continue to lose 1.5B in cash per quarter as they did most recently, albeit previous quarters were only losing 500M, I believe this is extra loss is due to ramp up in spend post IPO).
Alright, philosophy aside, let's look at the technicals. There is the potential for three indicators to converge at precisely the same time at the same place. For reference, the price target I have to short is 33.60:
Once the 33.60 range look look for confirmation with a break below the rising wedge and a nice ride down. In this market I'm taking profits early and often but could see a complete move down to $22 (which puts the market cap about equal with the amount of cash it has in the bank).
Let's quickly look at why RIVN is where it is today.
- IPO north of 100/share to bring in 16B in cash
- EV car hype ballooned the price, realization that a brand new car company is worth more than all incumbent car companies has brought it back down
- Price hit a local bottom at 19.25, meaning the company was trading at less than the amount of cash in the bank
- RIVN continues to lose ~2B a quarter, even with exceptional growth it will lose billions per quarter for years to come.
It is my opinion that the most recent bounce is 100% technical and not institutional buy and holders that will elevate the price long-term. Given that operational risk is exceptionally high - that is, to meet the current valuation the company will have to meet or exceed growth targets for the next 7-8 years (minimum) - the value of the company right now is primarily driven by the amount of cash in the bank. Every day that the company operates it should intrinsically be worth $50 million less (assuming they continue to lose 1.5B in cash per quarter as they did most recently, albeit previous quarters were only losing 500M, I believe this is extra loss is due to ramp up in spend post IPO).
Alright, philosophy aside, let's look at the technicals. There is the potential for three indicators to converge at precisely the same time at the same place. For reference, the price target I have to short is 33.60:
- The fib retracement from the most recent run down has 33.60 as the 38.2% level
- The 50d MA is moving down, currently at 34.88, targeting 33.60 in 2-4 days.
- Stochastics are flashing over bought
- And oh yea, did I mention this is all happening inside of a rising wedge?
Once the 33.60 range look look for confirmation with a break below the rising wedge and a nice ride down. In this market I'm taking profits early and often but could see a complete move down to $22 (which puts the market cap about equal with the amount of cash it has in the bank).
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