Rivian (NASDAQ:RIVN) technical analysis has captured the attention of traders and industry analysts alike as RIVN stock prepares for another golden cross, which follows an inverse head-and-shoulders (H&S) pattern. A golden cross would happen when the 50-day moving average (MA) crosses above the long-term MA. Currently, this junction appears to be around $14 per share and would be a bullish continuation signal for Rivian stock.
This isn’t the first golden cross occurrence. Rivian technical analysis shows yet another crossover in August and December of 2023. Rivian prices soared 38% in the immediate aftermath of a retest of the 200-day MA support in December, only to reverse course to a new all-time low of $8 per share. After its high-profile IPO in late 2021, this took RIVN stock losses to over 95%.
However, as market conditions continue to evolve, many wonder if RIVN stock might have finally bottomed out after being punished for its decision not to increase production this year. This is especially true as the company has been actively working on several strategies to enhance its manufacturing efficiency.
Rivian Streamlines Manufacturing Production
Like other electric vehicle (EV) manufacturers, Rivian has experienced high interest rates and inflation. It has struggled to meet production targets, raising concerns about its ability to scale operations efficiently. The EV market is also becoming increasingly crowded, with established automakers and new entrants vying for market share.
Rivian stock has plunged more than 60% this year alone. However, it has probably bottomed out as the company implemented several key operational changes to bolster its turnaround efforts. It now trades just around 40% lower year-to-date (YTD) after rising over 120% since April to $19 in July to an overall bullish trend.
RIVN stock has accelerated as the company streamlined its production processes, focusing on manufacturing efficiency and component cost reduction. Notably, it aims to achieve gross profitability by the fourth quarter of 2024, which could set the stage for positive cash flow and net income in the following years.
The EV manufacturer has expanded its product lineup, introducing more affordable models like the R2 mid-size SUV and future R3 crossovers to capture a broader market share. It delayed the construction of a new facility in Georgia to focus on R2 at its existing Illinois plant, saving over $2 billion in capital expenditures. The Illinois shutdown in April aimed to increase overall production capacity by about 30% due to improved efficiency.
Inverse H&S Supports RIVN Stock Reversal
Rivian technical analysis reveals a bullish trend as RIVN stock recently crossed above its 200-day MA. The potential bottom formation may be validated when the 50-day MA at $13.75 per share crosses above the 200-day MA of $14.50 per share to signal a golden cross.
Besides trading above both MAs currently, recent price action has established support at the upper channel. This suggests that the short-term uptrend triggered by the inverse H&S pattern remains accelerating. However, if RIVN stock fails to bounce, it may temper optimism for an immediate turnaround. The relative strength index (RSI) also remains far from oversold territory, suggesting further downside potential with key ‘shoulder’ support at the round level of $10.
Maintaining a bullish position requires building a well-managed long position with a long-term perspective. Entries could be scaled in from $14 down to $10, with targets at $25, $50 and $100. Conversely, a stop loss would fare well under the all-time low of $8 per share, at around $7, for a risk-reward profile of 12 times at the long end.
Bottom Line: Earnings Report Critical for Future
Rivian’s long-term bearish trend may have ended. This is especially true if the company beats EPS loss estimates of -$1.27 in its August 6 earnings and reaffirms —at least— its previous guidance.
Rivian’s long-term potential remains promising due to its now stronger brand following the license deal with Volkswagen (OTCMKTS:VWAGY) and planned expansion into more affordable EV models. However, the company must execute its plans effectively and manage its financial health to avoid further dilution or debt.
Despite some analysts’ positive outlook, there are significant risks. Some of those are balancing cash flow and future investments and the broader market’s slow adoption of EVs.
The company did say it expects to achieve a positive gross profit in the fourth quarter, which is now a turning point for RIVN stock. For the first quarter of 2024, Rivian reported revenue of $1.2 billion, slightly above analysts’ average estimate of $1.16 billion. If this trend continues, getting in early may produce better results than waiting.
On the date of publication, Stavros Tousios did not have (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.
On the date of publication, the responsible editor did not have (either directly or indirectly) any positions in the securities mentioned in this article.
