While the major equity indices stumbled on rising bond yield concerns, embattled but nevertheless outstandingly popular electric vehicle (EV) manufacturer Mullen Automotive (NASDAQ:MULN) jumped the other way, gaining over 3% in the afternoon session. Fading short interest implies that the bears may no longer be targeting MULN stock with gusto. Therefore, the bulls might move back in, though this narrative carries per usual.
Earlier this morning, MarketBeat contributor Thomas Hughes suggested that while MULN stock remains challenged, the tide may be turning. Specifically, Hughes singled out the combination of short interest data and compelling chart patterns that can lift the EV maker. Citing data from Fintel, short interest of float and the off-exchange short-volume ratio stood at 11.88% and 35.63%, respectively.
While both remain elevated, Hughes wrote, these stats decreased from the 14.8% and nearly 50% respective metrics posted last week. Further, the cost to borrow continues to rise and roughly quadrupled in the previous few weeks, likely impacting bearish sentiment for MULN stock.
“The takeaway is that falling short-interest is a clear sign that bearish interest is fading and will likely continue to support the price action in the near term,” wrote the analyst. As well, Hughes noted that while bearish pressures fade, MULN stock experiences rising support. Essentially, MULN presently prints a series of rising lows. Eventually, this could give way to rising highs.
MULN Stock May Face a Red Line at 38 Cents
While Mullen carries the full spectrum of investor opinions, it remains relevant largely due to incredible retail support. Jumping to a resounding start to the new year, MULN stock slipped into negative territory during some sessions in the back half of January. However, positive press – including Mullen’s pilot program at Los Angeles International Airport (LAX) – bolstered shares.
Still, not everything about MULN stock presents an encouraging profile. Recently, Mullen announced that it would deliver its I-GO Commercial Urban Delivery EV to Europe last month. Fundamentally, this initiative would allow Mullen to capture a lucrative portion of the European delivery market. However, as of this writing, the EV maker has provided no update to this potentially groundbreaking effort.
Adding to the frustration of stakeholders, a chasm exists between “regular” retail investors and their higher-acumen counterparts. Notably, TipRanks points out that among all investors it surveyed, 1.2% of portfolios hold MULN stock. Within this cohort, the average return for MULN sits at 0.7% in the last 30 days. Further, sentiment rates as “neutral.”
On the other hand, among so-called top investors, this cohort’s average return stands at 12.5%. As well, sentiment rates as “very positive.”
According to Google Finance, one month ago, MULN stock closed at 38 cents. Assuming that the majority of Average Joe investors are barely in the money from this level, investors should watch this point as a possible demarcation line. Should MULN drop meaningfully from 38 cents, it could spell the return of bearish sentiment.
Why It Matters
In a bid to boost sales amid a challenging consumer environment characterized by higher borrowing costs, Tesla (NASDAQ:TSLA) began cutting prices for its popular EVs last month. Moreover, the move sparked a competitive response. However, investors should pay close attention to how the development can impact upstart EV trades like MULN stock.
It’s always difficult to ask consumers to fork over big bucks for a high-ticket item like a car. However, with Mullen representing an unproven brand combined with broader pressures from rising interest rates, the narrative for MULN stock remains incredibly challenging. Therefore, investors should exercise strict due diligence irrespective of certain encouraging data.
On the date of publication, Josh Enomoto 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.