With RIVN set to join NASDAQ 100, expect a rally into year-end

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  • Rivian joins six other stocks on December 19 being added to the NASDAQ 100.
  • Mercedes-Benz and Rivian are parting ways on a proposed electric van joint production agreement.
  • RIVN stock is down 4.4% at $26.08 in Monday’s premarket.

On January 19, next Monday, Rivian (RIVN) will join the reconstituted NASDAQ 100 for at least the next year. As one of the most significant indices in the equity market, and the basis for the $164 billion Invesco QQQ Trust (QQQ) ETF, being added to the NASDAQ 100 should spur a rally in the Rivian stock price for the rest of December due to a wave of buying by ETFs and other index followers.

Rivian stock news: NASDAQ 100 inclusion should give RIVN a boost

Alongside Rivian being added to the NASDAQ 100, Baker Hughes Company (BKR)CoStar Group (CSGP), Warner Bros. Discovery (WBD), Diamondback Energy (FANG) and GlobalFoundries (GFS) will also join the index. Launched in 1985, the NASDAQ 100 represents the 100 largest non-financial stocks on the NASDAQ exchange. Typically, the NASDAQ 100 and the ETFs based on it are used by traders as a proxy for high-beta growth stocks that tend to outperform the broader market during rallies. The six companies being replaced on the NASDAQ 100 on January 19 are NetEase (NTES), DocuSign (DOCU), Baidu (BIDU), Skyworks Solutions (SWKS), VeriSign (VRSN), Match Group (MTCH) and Splunk (SPLK).

Because index tracking strategies are forced to buy up shares of the new additions, Rivian stock will have automatic demand lasting into year-end. Research from NASDAQ itself, says there are a number of benefits to being added to this index. “A significant amount of research finds index inclusion associated with increased investor demand, elevated stock valuations, and decreased cost of capital,” writes researcher Phil Mackintosh.

On top of that, simply being added to the list historically adds more than 1% in the five days between the announcement and the effective inclusion of new stock. New inclusions in the NASDAQ 100 always follow the quadruple witching day when a high number of derivatives contracts all expire on the same day. That day is December 16 this time around. Index futures, index options, stock futures and stock options all expire during that session, and this typically allows for plenty of volatility.

Rivian stock news: Mercedes-Benz and Rivian end electric van joint venture

Early Monday news arrived that Rivian will end its prior joint venture agreement to produce electric delivery vans in Europe with Merceds-Benz. The two automakers signed a memorandum of understanding back in September to jointly operate and invest in a Mercedes-Benz factory in Jawor, Poland. That factory is set to develop and produce fully-electric, medium-sized, and large vans that will hit the European market in 2025. Rivian announced that it needed to focus more on meeting its existing backlog of 

“At this point in time, we believe focusing on our consumer business, as well as our existing commercial business, represent the most attractive near-term opportunities to maximize value for Rivian,” CEO RJ Scaringe said in a statement.

Rivian has had a number of setbacks to its initial goals for the year. Supply chain issues have dealt the company a nasty turn with management announcing 2022 production would be halved. On top of that Rivian had to recall nearly all of its delivered vehicles due to a fairly simple engineering issue regarding a fastener failing to be correctly tightened. Rivian may have also not wanted to invest the large-scale level of capital needed on the Polish factory since it is already planning to spend $5 billion on a new factory outside Atlanta, Georgia. 

News of the agreement unwinding sent Rivian stock down 4.4% on Monday’s premarket to $26.08.

Rivian stock forecast

With Rivian stock selling off on the Mercedes-Benz announcement, the only nearby support is at $25. This level held both support and resistance respect during the early May through early July sell-off episode. Below there is the all-time low from May 11 at $19.25. The Relative Strength Index (RSI) at 40 shows a lack of demand in the market at the moment, and the 9-day moving average likewise remains below its 21-day counterpart in a bearish stance.

My own suggestion is that RIVN stock is unlikely to fall below $25 this week and will pick up markedly as traders begin picking up shares in anticipation of ETF demand. The primary resistance target for bulls at this juncture is the $31 price level which has seen a lot of focus as both support and resistance since October.

RIVN stock daily chart

RIVN 1-day chart

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