Despite the Current Weakness, Mullen Automotive (MULN) Investors Are Positioning for Another Bull Run [Updated: Stock Pops on New Orders]

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This is not investment advice. The author has no position in any of the stocks mentioned. WCCF TECH INC has a disclosure and ethics policy.

Mullen Automotive (NASDAQ:MULN), a pre-revenue EV company bearing a micro capitalization, rocked to the forefront of the equity leadership board in recent days as the stock registered a gain of over 300 percent between the 04th and the 22nd of March 2022. Since then, however, this bull run has visibly cooled, with Mullen Automotive shares tanking around 29 percent relative to the local high of $3.31 on the 22nd of March.

While Mullen Automotive has been operational for well over two decades, it recently underwent a stock-for-stock reverse merger with the SPAC Net Element. The EV manufacturer intends to start producing its Mullen FIVE EV in 2024 at a refurbished facility in Tunica, Mississippi. The EV will offer a range of 325 miles on a 95-kWh battery pack, all for an estimated MSRP of $55,000 before the application of tax credits. The company also plans to launch a high-performance electric racing car, dubbed the Mullen DragonFly, as well as the Mullen ONE – commercial electric vans that will offer a range of between 160 and over 200 miles, depending on the variant.

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Mullen Automotive is promising exciting new developments on the battery front as well. The EV player has partnered with NexTech to produce the much cheaper lithium-sulfur (Li-S) battery pouches that will power the company’s estimated production volume of 100,000 electric cars over the next five years. Apart from being a lot less expensive than comparable lithium-ion cells due to the relative ubiquity of elemental sulfur, these battery packs are also 60 percent lighter, boosting the overall range efficiency of Mullen Automotive’s EVs.

Perhaps most importantly, Mullen Automotive recently tested a 300Ah solid-state battery cell that offered results comparable to an EV range of over 600 miles on a 150-kWh battery pack. Moreover, such a battery pack can theoretically yield over 300 miles of range via an 18-minute DC fast charge. Nonetheless, as we had noted in a dedicated post last week, we would continue to withhold our judgment on this frontier until the company is able to afford its investors a lot more clarity on the commercialization ramp for this nascent tech.

Mullen Automotive (NASDAQ: MULN) Investors are Positioning for a New Bull Run

This brings us to the crux of the matter. Mullen Automotive shares exited a medium-term downward channel earlier in March, yielding a 300 percent-plus bull run. However, trends do not generally change in a linear fashion, with prolonged periods of consolidation often laying the requisite groundwork for a seminal shift in the overall sentiment. As is evident from the chart above, the stock is likely to remain locked in a consolidation pattern in the near term, with the most significant support currently located around the $1.5 price region, entailing a downside potential of around 36 percent from the current price level.

Nonetheless, investors continue to position for a bull run in Mullen Automotive shares.

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Source: https://www.barchart.com/stocks/quotes/MULN/put-call-ratios

As is evident from the snippet above, the open interest in calls currently dominates all upcoming expirations in 2022. Crucially, around 10x as many calls as puts were traded yesterday for the contracts expiring on the 14th of April.

Moreover, the demand for calls, as determined by the implied volatility spread between 25-delta puts and calls, is currently at the second-highest level so far in 2022. As an illustration, the 30-day IV spread between puts and calls is currently at -37.6, exceeded only by the skew of -45.6 on the 03rd of March, when the stock was gearing up to exit its downward trend channel. The current IV skew of -37.6 in favor of calls is a potent illustration of the prevailing high demand for calls vs. puts. As a refresher, the implied volatility of an options contract usually rises as its demand increases.

To summarize, Mullen Automotive shares are likely to remain in a consolidation pattern in the near term, with risks skewed to the downside. However, investors continue to bet on another bull run, given the positioning in the options market.

Update: Mullen Automotive to Reveal New Orders in Q2 2022

Well, it seems that our post today was particularly prescient. The CEO of Mullen Automotive just announced in an interview that the company is slated to reveal orders from a "major, major Fortune 500 company" for its commercial vans in Q2 2022.

You can watch the clip here:

It seems that yesterday's frantic call buying had something to it after all. The stock is up 25 percent at the time of writing:

Source: https://www.nasdaq.com/market-activity/stocks/muln
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