Three Stocks: Costco, Tesla, and Rivian

By Chris Johnson, Quantitative Specialist, Money Morning • March 8, 2024

Costco

Costco (COST) delivered their fourth quarter results after the close last night, and shares are trading 6% lower as a result.

The stock was a perfect set-up for a “sell the news” move as shares have rallied 6% in the week ahead of the report. Looking back further, COST stock was up 60% over the last year ahead of the report.

It was due for some selling.

The report wasn’t bad except for a small miss on revenue during the holiday season. Looking at past fourth quarter revenue, there tends to be a slight slup in holiday quarters, which makes sense… is Costco the first place you think to buy holiday gifts? Probably not.

Let this “sell the news” move play out and consider this a “buy the dip” opportunity at $700, which is round-numbered support and where the stock’s bullish 50-day moving average site.

Tesla

The market gave Tesla (TSLA) a break yesterday as the stock rallied with the broad market, but that was just a reprieve.

TSLA shares are trying HARD to not break below $175. We’ve seen the market support the stock at that price over the last three days, but momentum is working against the bulls.

$175 was also the price the stock bounced from in early February, which means a break of that support next week will bring a new wave of selling pressure to Tesla stock.

Here’s my take: Tesla moved into a long-term bear market trend in January as it broke below its 20-month moving average.

The last time the stock traded in a trend like this saw an ultimate bottom of $100 in January 2023.

This is not the time to try to catch a falling knife with Tesla, let it bounce off of the floor first.

Rivian

Rivian (RIVN) shares rallied 15% yesterday as the company unveiled the newest models of electric vehicles. Management also took the opportunity to announce the shifting of EV production in a move to cut costs.

Here’s the thing: Almost 20% of Rivian’s float has been shorted.

That puts the stock near the top of “short squeeze candidates,” which is what likely fueled yesterday’s 15% rally, not the vehicle announcements.

What does that mean?

It means that the next two days are critical.

We all know that the EV market is drying-up, just look at the best producer in the space TSLA. Yesterday and today’s rally is likely to be a flash in the pan that will be sold next week. A move back below $12.50 will drop the stock to $10 in short order. That’s a 20% drop, and I see it as an opportunity for the short out there.