Trading in Rivian Automotive, Inc. (NASDAQ:RIVN) is quiet Tuesday. But the shares appear to have broken resistance. This could have bullish implications and may suggest a move higher. This is why Rivian is our Stock of the Day.
Supply and demand drives the stock market. If there is more supply of a stock, meaning shares to be sold, than there is demand or shares to be bought, the stock will trend lower. This is because traders and investors who wish to sell will be forced to offer their shares at discounts, and this will push the price lower.
The opposite is true if demand outweighs supply.
If there are more shares to be bought than there are to be sold, those who wish to buy will be forced to outbid each other to attract sellers. This forces the shares into an uptrend.
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Resistance is a price level or a narrow price range where a large volume of supply or shares is available to sell. If a market is moving higher, there is more demand than supply. But at a resistance level, there is enough, or maybe even more than enough, supply to fill all of the demand.
This is why rallies end or pause when they reach resistance. Buyers don't need to force the price higher.
Sometimes, when a stock reaches resistance, the sellers eventually finish or complete their orders. This forces buyers to outbid one another again if they want to draw sellers back into the market. This results in a new uptrend.
It may be happening with Rivian.
As you can see on the chart below, $18.10 has been a resistance level. Moves higher ended there in early November and early December.
Yesterday, the stock cleared this level. This could mean that the investors and traders who created the resistance have finished or canceled their orders. With this large amount of supply taken out of the market, the stage could be set for Rivian to form a new uptrend.
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