Shares of electric car manufacturer, Lucid Group (NASDAQ:LCID), saw a strong opening on Monday following the announcement that Ayar Third Investment Company, a majority stockholder of the company affiliated with Saudi Arabia’s sovereign wealth fund, Public Investment Fund, is injecting $1 billion into the Lucid.
This significant investment comes in the form of newly created convertible preferred stock, with Lucid stating that the $1 billion proceeds will be allocated towards various corporate needs, including capital expenditures and working capital. This isn’t the first time Lucid has sought funding since going public. In the fiscal year 2022, they raised $1.55 billion, and in FY 2023, over $3 billion was raised through the issuance of common stock.
Back in early 2021, Lucid’s public debut through a merger with Churchill Capital Corp IV made it a highly talked-about stock. By the end of that year, Lucid’s market cap had soared past $80 billion. However, its stock has been on a downward journey since then.
The journey from euphoria to despair
After making a high of $57.75 in November 2021, LCID’s stock went on a massive downtrend that saw it falling all the way down to $6 in mid-2023.
The stock did find some support at these levels as it traded in a narrow $8 to $5.5 range between March and August 2023. However, that support turned out to be short-lived as Lucid again started a down move that saw the stock crash to $2.56 in January this year.
All this while the stock was in downtrend 1, the $5.5 to $8 range and then in downtrend 2, its weekly average true range kept falling. Just last week, the stock was testing lows of $2.56 before witnessing a significant surge on Monday. Now, the burning question is: Could this be the reversal that Lucid’s bulls have been eagerly awaiting?
Lucid’s bullish momentum: A closer look
All the short-term indicators for Lucid are pointing towards a reversal. However, investors need to remain cautious with a stock as volatile as this.
For bulls to have a fighting chance in the longer-term timeframe, the stock will need to cross its crucial short-term resistance at $3.8. Unless the stock breaks above it, one can’t say that the stock has entered bullish territory with any confidence.
Bears remain in charge as long as the stock is trading below $3.8. However, even they need to remain guarded if it doesn’t go back to test$2.55 in the coming days.
For those not currently invested, it might be wise to wait on the sidelines. Monitoring the situation until either $2.55 support or $3.8 resistance shows signs of yielding could prove the best strategy.
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