Rivian's 6.5% Plunge: A Volatile Turn in the EV Sector?

Summary
• Rivian (RIVN) plunges 6.5% intraday to $15.73 amid Morgan Stanley's 'Underweight' downgrade.
• CEO RJ Scaringe unveils AI-driven autonomy tech, but market skepticism persists.
• RIVN trades near 52-week high of $18.60 despite $10.36 52-week low.
• Turnover surges to 76M shares, signaling heightened short-term volatility.

Rivian Automotive (RIVN) faces a dramatic intraday selloff, dropping 6.5% to $15.73 as Morgan Stanley’s bearish call clashes with the company’s AI-driven autonomy ambitions. The stock’s sharp decline, despite a $16.3564 price tag near its 52-week high, underscores the sector’s fragile confidence. With Tesla (TSLA) also down 0.86%, the EV industry’s mixed signals highlight the precarious balance between innovation and execution risks.

Morgan Stanley's Downgrade Sparks Investor Frenzy
Rivian’s 6.5% intraday drop stems directly from Morgan Stanley’s 'Underweight' downgrade, which cited risks tied to the R2 SUV’s 2026 launch and broader EV market headwinds. Analysts highlighted Rivian’s smaller scale, financial challenges, and the loss of the $7,500 federal tax credit for the R2. Despite Stifel and Tigress Financial maintaining 'Buy' ratings, the downgrade amplified existing concerns about slowing EV adoption, charging infrastructure gaps, and affordability. The stock’s volatility—31 moves of over 5% in the past year—reflects its sensitivity to macroeconomic and product-cycle risks.

EV Sector Faces Mixed Signals as Tesla Trails
The EV sector remains under pressure, with Tesla (TSLA) down 0.86% despite its 14x forward sales multiple. Rivian’s 3x forward sales multiple appears undervalued, but its production challenges—delivering just 41,500–43,500 vehicles in 2025—contrast sharply with Tesla’s scale. Sector-wide, slowing EV adoption, rising interest rates, and competition from Chinese automakers weigh on sentiment. Rivian’s R2 launch in 2026 will be pivotal, but delays or weak reception could mirror Tesla’s recent struggles with production bottlenecks.

Options Playbook: Capitalizing on Volatility and Key Levels
• MACD: 0.853 (bullish divergence), Signal Line: 0.763, Histogram: 0.091 (momentum waning)
• RSI: 82.9 (overbought), Bollinger Bands: $13.87–$18.90 (price near lower band)
• 200D MA: $13.57 (price above), 30D MA: $15.80 (support near $15.17)

Rivian’s technicals suggest a short-term bearish bias, with RSI overbought and price near the lower Bollinger band. Key support at $15.17 (30D MA) and resistance at $16.50 (200D MA) define the near-term range. The RIVN20251219P16.5 and RIVN20251219C17.5 options stand out for volatility and liquidity:

• RIVN20251219P16.5 (Put):
- Strike: $16.50, IV: 68.69%, Delta: -0.45, Theta: -0.0021, Gamma: 0.22, Turnover: 2.07M
- IV (high volatility), Delta (moderate sensitivity), Gamma (strong price sensitivity).
- A 5% downside to $15.54 yields Payoff: $0.96/share. This put benefits from time decay (theta) and gamma-driven price swings.

• RIVN20251219C17.5 (Call):
- Strike: $17.50, IV: 62.53%, Delta: 0.32, Theta: -0.055, Gamma: 0.22, Turnover: 967K
- IV (moderate), Delta (moderate sensitivity), Theta (strong time decay).
- A 5% downside to $15.54 yields Payoff: $1.96/share. This call thrives on gamma-driven rallies if the stock rebounds.

Aggressive bulls may consider RIVN20251219C17.5 into a bounce above $16.50, while bears should watch the $15.17 support level. If $15.17 breaks, the RIVN20251219P16.5 offers short-side potential.

Backtest Rivian Automotive Stock Performance
The backtest of Rivian Automotive (RIVN) after an intraday plunge of -7% from 2022 to the present shows mixed short-term performance but a slight positive return over the longest 30-day period. The 3-Day win rate is 47.52%, the 10-Day win rate is 45.74%, and the 30-Day win rate is 45.94%, indicating a higher probability of positive returns in the short term. However, the average returns over these periods are negative, with a -0.16% return over 3 days, a -0.81% return over 10 days, and a -0.47% return over 30 days. The maximum return during the backtest was 0.08%, which occurred on the last day of the backtest period, suggesting that while there is some potential for recovery, the overall performance has been lackluster.

Rivian at a Crossroads: Strategic Entry Points Emerge
Rivian’s 6.5% drop reflects a mix of bearish sentiment and technical resistance, but its AI-driven autonomy roadmap and undervaluation present asymmetric opportunities. Investors should monitor the $15.17 support (30D MA) and $16.50 resistance (200D MA) for directional clues. With Tesla (TSLA) down 0.86%, the EV sector’s broader dynamics will influence RIVN’s trajectory. Act now: Consider the RIVN20251219P16.5 for downside protection or the RIVN20251219C17.5 for a rebound trade. Watch for a breakdown below $15.17 or a surge in R2 launch optimism.