Welcome to the (new) Pit Report! 

Each week, I’ll give an overview of a stock and Licia Leslie will follow that up with a chart analysis the next day. Andrew Giovinazzi will then finish out the week with a volatility breakdown.

Have a stock YOU want us to review? Email my team here. – Mark

Hey Traders,

Bill Griffo here in the Pit Report today.

Rivian Automotive (Ticker: RIVN) went public just ahead of 2022’s bear market in stocks. 

Good timing for RIVN founders … bad timing for RIVN investors.

Initial price targets were boosted to as high as $150-$160 … but fast-forward to today and reality has set in.

RIVN just announced a reduction in headcount of 6% … 

I actually view this as good news for investors. It indicates that cost-cutting and profitability are main focuses for the company.

And there are other reasons timing is right for a bullish play on RIVN. 

Lean and Mean

Cutting costs is rarely easy, but it is a must in the current environment of price cutting and slower economic growth.

By lowering headcount and wages, RIVN in a better position to join forces with a strategic partner (maybe Amazon?). The next step is a break-even gross profit by the end of 2023.

Other positive macro forces behind RIVN include:

• Rising consumer interest in EVs and positive feedback from its customer base

• The Inflation Reduction Act, which will assist in building a supply chain and accelerate the transition to clean transportation.

• The company’s strategy in software, which is a key component to drive revenues through services

An Avalanche of Cash

Most importantly is the inevitable ending of the Fed’s tightening cycle that will unleash a portion of the nearly $5 trillion of cash that is sitting on the sidelines into the markets.

RIVN stock will draw a lot of attention after a 70%+ correction since its IPO. 

What’s the Trade?

I believe the strong rally in stocks will continue and growth stocks will be the biggest winners. 

With RIVN just starting to build a base and a low of $15.28 I like selling March 17 puts for just over $.60 

I would be happy buying the stock at $14.40 and then selling calls above, while the company progresses with its strategy for profitability.

I like the increase in volume on the recent trend higher and the relative strength holding above 50. 

I’ll add this trade to my portfolio and update you on it in my Power Income letter.

Live and Trade With Passion My Friends,

Griff