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Mullen Automotive (NASDAQ: MULN) Faces Volatility Amidst Stock Surge and Fundamental Concerns

StockInvest.us, 2 months ago

Mullen Automotive Technical Analysis

Mullen Automotive, Inc. (NASDAQ: MULN) experienced significant volatility in its stock price recently. The stock closed at $11.04 on December 26, 2023, with a change of $1.20, representing a 12.14% increase. This rise followed a roller-coaster pattern after a previous session drop of 31%. A noteworthy rally occurred on December 21, when Mullen Automotive's shares soared 78.1% post the enactment of a stock split.

The technical indicators point to a heated market activity. The Relative Strength Index (RSI) sits at an elevated level of 77, suggesting that the stock may be approaching overbought territory, which could lead to a consolidation or pullback in the near term. The Average True Range (ATR) of 15.22 indicates considerable volatility. MULN's price is currently below both the 50-day moving average ($19.97) and the 200-day moving average ($528.06), although these figures may have been distorted by the recent reverse stock split. The Moving Average Convergence Divergence (MACD) shows a positive momentum at 0.34.

The trading volume of approximately 5 million shares on the last close is notably higher than the average volume of 1 million, indicating a significant investor interest. There is no resistance level in sight, while the support is pegged at $9.84, yet with such extreme volatility, these levels could be tested promptly.

Fundamental Analysis

Fundamentally, Mullen Automotive has been generating news that contributes to the stock's volatility. The company reached a 100-vehicle production milestone, which may have positive implications for its operational achievements going forward. Meanwhile, the market had mixed reactions to its giant order announcement with Randy Automotive, with some traders considering it a public relations stunt.

The company's earnings per share (EPS) stands at a staggering negative $31,907.84, and a PE ratio is not applicable due to negative earnings, reflecting significant financial distress. Moreover, the recent 1-for-100 reverse stock split suggests efforts to maintain NASDAQ listing requirements, which might typify issues with shareholder equity and stock price.

Mullen Automotive The market cap of approximately $45.59 million and shares outstanding of 4.13 million hint at a relatively small player in the EV space, which suggests higher risk and potential for volatility due to proportionately more significant impact from individual news events or market sentiment changes.

With an earnings announcement forthcoming on January 11, 2024, investors may be cautious as they anticipate company's financials and future outlook.

Stock Performance Predictions

Given the heightened volatility and overbought RSI levels, short-term pullback is possible on the next trading day. However, with the company's recent production milestone news, any announcements in the interim could fuel further short-term rallies. Considering the upcoming week's potential, market sentiment and any additional news could heavily influence the stock's direction due to its smaller market cap and high sensitivity to news flow.

Overall Stock Evaluation

Considering the above analysis, MULN presents as a high-risk investment. The recent price surge due to a reverse stock split and positive production news is countered by the fundamental concerns of negative earnings and a small market capitalization. Therefore, MULN would be categorized as a 'Hold' for investors who are currently in position and willing to weather potential volatility. New investors should approach with caution due to the risks of holding a stock that can exhibit significant price swings on news sentiment, without a strong fundamental underpinning.

It is advisable for potential buyers to wait for a more stabilized post-consolidation pattern or until the earnings announcement provides a clearer financial picture. Meanwhile, shareholders might want to set tight stop losses and monitor the stock closely given its recent erratic behavior. As always, it is important to align individual investment decisions with one's risk tolerance and investment strategy.

Check full Mullen Automotive forecast and analysis here.