Watch This Key Chart Area After Stock’s Big Gain in After-Hours Trading

Rivian (RIVN) shares experienced a significant 50% surge in extended trading on Tuesday following the announcement of German automaker Volkswagen’s (VWAGY) plans to invest $5 billion in the electric vehicle (EV) startup. This investment is part of a joint venture aimed at creating industry-leading vehicle software technology.

Key Takeaways

• Rivian shares jumped 50% in extended trading on Tuesday following news that Volkswagen plans to invest $5 billion in the electric vehicle startup as part of a joint venture to create industry-leading vehicle software technology.
• Volkswagen will make an initial $1 billion investment in the EV maker and expects to inject another $4 billion into the company by 2026.
• Rivian founder and CEO RJ Scaringe said the partnership will leverage its technology through Volkswagen’s global reach and secure the capital requirements needed for sustained growth.
• A breakout above a zone of resistance in Rivian shares between $15 and $20 could pave the way for a test of last year’s high set in July at $28.06.

The initial $1 billion investment from Volkswagen will consist of an unsecured convertible note, which will convert to Rivian shares on or after December 1st. Rivian’s founder and CEO, RJ Scaringe, expressed optimism about the partnership, highlighting the potential for broader market reach and securing capital needs for substantial growth.

This joint venture comes after Ford (F) exited its majority stake in Rivian last year, shifting its focus away from co-developing plug-in cars with the EV company. The EV industry has faced challenges such as shrinking profit margins due to increased competition and a slowdown in sales caused by higher interest rates.

Rivian reported a loss of $1.45 billion in its latest quarter as it updates its manufacturing facilities to introduce a new lineup of pickups and SUVs, including the R2 and R3 midsize platform expected from 2026. The partnership with Volkswagen is expected to help Rivian become cash-flow positive and ramp up its next-generation vehicle production.

Monitor This Key Zone of Resistance on Rivian’s Chart

Since gapping 25% lower in late February, Rivian shares have formed a potential inverse head and shoulders pattern, indicating a possible reversal of the downtrend. The expected stock price surge following the breakout above the pattern’s neckline confirms this formation.

Investors should keep an eye on the key area on the chart between $15 and $20, where Rivian’s stock faces a zone of resistance based on prominent peaks and troughs dating back to January last year. A breakout above this technical region could lead to a test of last year’s high at $28.06.

Rivian shares surged 49.9% to $17.93 in after-hours trading on Tuesday, reflecting investor optimism about the company’s future prospects.

Disclaimer: The comments, opinions, and analyses expressed are for informational purposes only. The author does not own any of the mentioned securities at the time of writing.

Read the original article on Investopedia.