Mullen Automotive Stock: Volume, Price Action Point To Short-Squeeze

Key Points

• Mullen Automotive has a short-squeeze brewing but don't count on it just yet. 
• There are a number of risks and catalysts on the horizon that promise to bring volatility. 
• For Mullen Automotive, it all comes down to production and if it will begin. 

If you are wondering about Mullen Automotive NASDAQ: MULN and the chance for a short squeeze the volume and price action are highly suggestive. However, as bullish as they are, they indicated a growing battle between the bulls and the bears. On the one side are the bears. They are probably looking at the company’s incredibly high share count, the high float percentage, the company’s need for capital and the plans to start production and thinking the company can’t do it.

On the other are the bulls. They are reading the news, watching this story develop very positively, and seeing revenue just around the corner. In between is the company itself. The story is developing in a very positive manner, production is at hand and more than a year ahead of schedule, but it’s time to see some more proof. If not, this market could keep winding toward the side or move back down to set a new low. 

Mullen In The News, Investor Attention Heats Up 

Mullen has been one of the most written-about stocks in the market over the past 90 days. The company has had dozens of articles detailing the business’s acceleration. This acceleration began last summer with the purchase of Bollinger Motors. It was amplified by the acquisition of ELMS assets, the rights to the I-Go, gaining its first major partner dealer, the follow-on order for 6,000 vehicles and the plans to begin production this quarter.

What this means for investors is that market awareness is growing, for both good and bad, and that is good for the stock price. The increase in liquidity should help stabilize the volatility in the near term while providing fuel for a rally (sell-off) when the next major catalysts come out. 

Regarding the volume, the volume in Mullen Automotive went through the roof the first week of January and may continue to pick up as we approach some major milestones. As it is, volume in the first week of the year comes in as the 5th highest since the company completed its reverse merger, and this is largely due to short-selling and rotation in the market as it is to outright bullishness.

The short interest remains high and is listed at 10% to 44% depending on the website and how the data is calculated. The takeaway is that a lot of the bearish action is being done by dark pools and off-exchange action, which accounts for a large amount of the total volume. Assuming the company can give the bears a reason to run, there is fuel for a strong short-covering rally. 

What Should Mullen Investors Expect In The Near-Term? 

Mullen Automotive has 3 potential catalysts coming up in quick succession, including the annual report, a shareholder meeting and a series D preferred share offering. The annual report is due on January 14th. It was delayed from December 30th, which may be a red flag, or the company is waiting to issue some good news.

The report is important, investors want to know how much capital the company has and how much more may be needed, but news on production plans will be at the fore. The next catalyst is the shareholder meeting which may result in a reverse stock split, an increase in the share count or both. The 3rd is plans for a series D offering preferred shares to current investors. 

Looking at the chart, the market is hopeful the string of news will result in the start of production and revenue by quarter-end. The stock is forming a clear bottom in the $0.25 to $0.36 range that could easily turn into a reversal. Assuming the news is good, the stock could retest the $0.60 in a few days or less.

A move above that level could take the stock up to the $1 level, where it needs to be for NASDAQ compliance. If not, this market could easily wallow where it is (if it doesn’t move lower). It all depends on the news and the timeline for production and revenue.