Though Lucid’s (NASDAQ: LCID) short volume ratio has remained relatively stable, if heightened, the stock’s unexpected upsurge created conditions for a substantial short squeeze.
Indeed, after briefly dipping below 50 on the last day of February, LCID shares’ short volume ratio began climbing and hit its March high of 71.04 already on the fifth before stabilizing in the 63 to 69 range, per the data Finbold retrieved from Fintel.
The high proportion of shorts is easy to understand given Lucid’s nearly ceaseless decline in the stock market: its equity is a massive 77.70% below the initial public offering (IPO) value and 95.94% below the 2021 highs.
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The shares’ downturn has been accompanied by business struggles. For example, Lucid’s deliveries for the first half of 2024 were approximately 90% lower than originally estimated.
Lucid stock initiates a surprise comeback on Wednesday
Despite the overall grim trajectory, Lucid stock’s exceptionally strong open on Wednesday, March 12, put the numerous short positions in jeopardy.
Specifically, LCID shares are up 5.50% on the daily chart and 6.59% in the last week of trading, having reached $2.25.
Why Lucid stock is rallying
The reasons for the rally appear manifold. Though the greater stock market has struggled for months, Monday, March 12, was especially bloody as it witnessed a massive S&P 500-wide wipe.
The deep plunge offered an opportunity for a rally, which took many of the stocks that dropped on Monday higher on Tuesday, with LCID shares likely being swept upward in the process.
Beyond the broader factors, tailwinds more directly related to the electric vehicle (EV) maker have also emerged. Late in February, Lucid announced a CEO change, and Benchmark’s Mickey Legg was impressed enough to reiterate a ‘buy’ rating and accompanying $5 price target after meeting with the firm’s management.
Furthermore, the EV maker is expected to spend approximately $1.4 billion in 2025 to boost its manufacturing capacity.
Elsewhere, despite most analysts estimating that President Trump’s pro-oil agenda would negatively impact the entire electric vehicle industry, save for Tesla (NASDAQ: TSLA), Elon Musk’s role in the new administration has led to the company rapidly losing market share.
Such a setup could vicariously benefit Lucid should the EV maker find a way to fill the emerging vacuum – a plausible scenario given the fact the company is backed by the wealthy Saudi Arabian Public Investment Fund (PIF).
Featured image via Shutterstock
