It’s been a very positive week thus far for investors in Lucid Motors (NASDAQ:LCID). Today, shares of LCID stock are up nearly 5% in this afternoon’s session. This move brings this stock more than 13% higher on a week-to-date basis alone.
The key driver for this move in Lucid is the upcoming 34th annual reconstitution of the Russell indices. On a periodic basis, various indices add and subtract stocks to adjust for changing market conditions and factors that may allow for new entrants over time. Given Lucid’s importance in the overall electric vehicle (EV) sector, the move to add LCID stock to the Russell indices isn’t much of a shocker.
However, this move is a big deal for investors. That’s because the inclusion of a particular stock in an index requires index funds and other institutional money managers to purchase shares commensurate with its overall holdings. Thus, increased buying pressure in the near-term provides a compelling short-term catalyst for said stock.
This reconstitution is set to take place tomorrow, with changes making their effect after market close. Thus, next week will be the first true week of trading for LCID stock on the Russell indices.
So, is now the time to buy Lucid ahead of this inclusion? There’s only one day left, after all. Let’s dive in.
Time to Buy, Hold or Sell LCID Stock Before Russell 3000 Entry?
These reconstitution catalysts are really hard to time. In many respects, the fact that investors anticipate so much buying pressure up-front leads to what ends up being a self-fulfilling prophecy, most of the time.
Accordingly, this near-term move we’ve seen in LCID stock isn’t out of the ordinary. However, investors may want to be careful, as we near the ultimate reconstitution date. That’s because just as fast as Lucid rose on this non-fundamental factor, the market can taketh away, just as easily.
Thus, I’m not a believer that this week’s gains can hold for very long, especially if the recent bearish market sentiment we’ve seen resurfaces again. Inflation is still very high, and Lucid is still very unprofitable. There’s a reason this stock has been beaten up in the first place.
That said, LCID stock may be a trader’s paradise right now. Tomorrow should be an interesting day for this EV maker, for sure.
On the date of publication, Chris MacDonald did not have (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.