Lucid Group, Inc LCID was falling more than 6% on Monday after surging almost 100% at one point on Friday before settling up 43%.
The start-up EV maker’s huge move to the upside and the plunge that followed caused the stock to be halted on a circuit breaker multiple times.
The move was caused by a rumor circulating that the Saudi Public Investment Fund was planning to buy out the remainder of Lucid, which caused traders and investors to pile into the beaten-down stock. On Friday, Lucid saw its highest level of trading volume since Nov. 16, 2021.
On Monday, BofA Securities issued a note on Lucid, reiterating its belief that Lucid required funding according to prior research. Analyst John Murphy believed the company will need $10 billion over the next five years.
The firm maintained its Buy rating and a price target of $18, which suggested about a 50% upside from the current share price.
Lucid “is one of the most attractive among the universe of start-up electric vehicle (EV) automakers and also a relative competitive threat,” Murphy said.
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The Lucid Chart: When Lucid skyrocketed on Friday, the stock burst up through the 200-day simple moving average (SMA) but closed the trading day back below the level. On Monday, Lucid was consolidating lower under the 200-day SMA, with an inside bar.
- Sideways consolidation was the most likely scenario after Friday’s massive price adjustment. Lucid may continue to trade sideways over the next few days, under the 200-day SMA. If that happens, traders want to see the sideways trading occur on decreasing volume and then for big bullish or big bearish volume to come in and break the stock from the horizontal formation.
- Consolidation would also help to lower Lucid’s relative strength index (RSI), which soared up to 79% on Friday. When a stock’s RSI reaches or exceeds the 70% level, it becomes overbought, which can be a sell signal for technical traders.
- Bullish and bearish traders who aren’t already in a position may want to wait for a new trend to develop to gauge future direction.
- Lucid has resistance above at $12.20 and $15.30 and support below at $9.48 and $8.35.
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Photo: Courtesy Lucid