MULN stock headed for sixth straight session of losses

Update: This may amount to the sixth day of consecutive losses for Mullen Automotive. The speculative hearthrob is down 7.1% at $1.57 about 90 minutes into Wednesday's session. The Nasdaq Composite, a leading growth and risk-on indicator, is down more than 0.5%. More value-focused indices like the S&P 500 and the Dow are up. The latter is up nearly 0.9% even. The whole market is distrustful of growth stories after longtime secular growth overlord Netflix has produced its first quarter of subscriber losses in more than a decade. MULN stock is nothing if not a growth story. Volume for the call contract with the $1.50 strike expiring this Friday is leading the way. The contract has dropped 44% on Wednesday to $0.14, while 831 contracts have exchanged hands.

MULN stock is gone, and maybe it is time to move on. Harsh, but that appears to be what the market is telling us. Five successive days of heavy losses has seen MULN stock fall from $2.71 to $1.69. It may not sound that much, but in percentage terms that is a loss of 37.6% in the space of five days. That is meme stock dynamics and shows how volatile these names can be.

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MULN Stock News: Momentum, the only game in town

By and large, penny stocks and most meme stocks are all about momentum. This is not value investing or even traditional growth investing. It is highly speculative and riding momentum. Not a problem but getting attached to a stock or a cause is not likely to lead to a profitable trading career, so we would always urge traders to focus on price. If it is telling you to get out, then it is time to do exactly that. If it is riding higher, then stay on as long as possible.

How do you tell when momentum is fading? In meme stocks there are a few metrics we check. First, there are social media mentions. There is a reasonable correlation between social media mentions and meme stock performance. Various sites on the internet track social media mentions or trends. This can be useful.

Second – volume and price. When the frenzy is peaking, volumes will be huge and price gains will also be huge. For the most part, getting out on the first down day is the key. Or in fact, getting out on the first day where the close is lower than the open or a premarket spike is also a good indicator of falling momentum and sentiment. 

Onto Mullen Automotive itself, we are now likely all aware of the contents of the Hindenburg Research report. There has been little of note from Mullen in relation to this. They are not obliged to do so, but failing to address such a critical report does not give us confidence.

The only news of note has been an SEC filing in relation to a stock offering. The filing says Mullen may sell up to 253,109,032 shares of common stock. This filing is dated Friday, April 15. On Monday, April 18, Mullen issued a press release that it was to begin EV battery production at its plant in Monrovia, California. This caused MULN stock to spike briefly in the premarket by 10% before quickly collapsing. This again is a fading momentum sign. The premarket is often where the large spikes happen, but follow-through is more difficult once the regular session begins. The reason is the lack of liquidity in the premarket. With little trading, it is easier to move the price of a stock.

MULN Stock Forecast: $2.06 is the last straw

Technical analysis on penny stocks is not a great fit, but we can see how breaking $2.06 brings MULN back to a target now of $1. We have a declining Relative Strength Index (RSI), Money Flow Index (MFI) and Moving Average Convergence Divergence (MACD). All momentum is gone. There may be occasional spikes, but we would expect them to fail below previous spikes. 

MULN stock chart, daily

Update: The trend continues on Wednesday as MULN starts the regular session down 2% but is quickly moving lower as the day progresses. MULN stock at the time of writing is down 10% after just forty minutes of the regular session. Breaking $2.06 has led to a complete loss of momentum and the stock remains under the spectre of the Hindenberg report. Short selling may not be to everyone's taste but it is an essential element of a normal functioning market as is questioning the perceived wisdom. Just as we question politicians and governments why should we not be able to question companies and their leaders? Some are guilty of being less than truthful and the better and honest short-sellers seek to identify this and yes profit from it. We have no insight to add on the Hindenburg report's accuracy but clearly, it is having a continued effect on MULN, especially as the company has, as far as we are aware, yet to address any of the questions raised. That is their right but investors are clearly losing faith.