Is A Short-Squeeze In Mullen Automotive About To Begin?

Key Points

• Mullen Automotive's short interest is as high as 45% on some sites. 
• The cost of borrowing is skyrocketing as bulls hold tight and bears search for shares to short. 
• The charts are very bullish and need a single catalyst to ignite a rally. 

For those wondering when or if Mullen Automotive's NASDAQ: MULN stock price will see a short squeeze, the best answers are probably soon. Based on the string of news events that include the company’s plans to begin delivering I-Gos in Europe and its own vans here in the states as soon as this quarter, and the short interest data, the odds highly favor a short squeeze and all it will take to start it is a single catalyst. 

The short interest data varies greatly from site to site but one thing is clear, the bears are still shorting this stock despite the obvious support of the broader market. Depending on which site you look at and which figures you use, the short interest ranges from about 10% to about 45%, including dark pools and off-exchange activity. The truly astounding figures, however, are the cost to borrow which has been running more than 350% and as high as 750%. 

What we can be sure of in Mullen price action is volatility. The bears are increasingly convinced that this company can not execute its promises, while the bulls are more convinced by the day. Eventually, one of these groups will give in, capitulate, and when they do, the action will be vigorous, to say the least.

The Mullen Automotive Story In Two (2) Charts 

The Mullen Automotive story is as long as any in the EV market but really begins in early 2022 following the completion of its reverse merger and IPO raising money for operations. That event sparked a short squeeze in the stock marked by more than 6.5 billion share trades.

It is easy to see on the weekly chart; it put a bottom in the market as well, a bottom that was hit later in the year and is so far confirmed. The first bounce occurred in late summer, and then support was retested again in late fall 2022. This bounce is marked by another extreme spike in volume that has yet to play out. The indicators on this chart are also interesting because both the MACD and stochastic are diverging from the fresh lows and showing bullish signals echoed on the daily chart. 

The daily chart is bullish enough but is compounded by the strong signals shown on the weekly chart. The daily chart shows the initial retest of support in late summer, the retest and bounce sparked by the acquisition of Bollinger Motors, and a retest in late fall and another in late December.

These 2 retests are of particular note because they show not only support but rising support that is echoed in the indicators. The MACD and stochastic on this chart are also divergent from the recent lows and show signals consistent with bottoming and the potential for reversal. The market is currently testing resistance at the December highs near $0.325, if it can get above there a move up to the summertime highs near $0.60 will be possible and it could happen fairly quickly. 

Potential Catalysts For Mullen Automotive 

There are numerous catalysts in the works for Mullen Automotive at this time but the most important may be the upcoming shareholder vote. The vote is delayed from the December vote, which failed to meet quorum requirements.

The vote is for approval for a reverse stock split that could get the price up above the $5 level. The split is twofold, the 1st is to get the share price above the $1 level so the company can avoid delisting from the NASDAQ exchange, and the 2nd is to provide the company with more ammunition for raising capital.

Ultimately, the reverse split will dilute shareholder value and provide the company access to cash without tapping into the debt market. Without cash, the company may not be able to manufacture its vehicles which would be detrimental to share prices.