Lucid Group Inc. (LCID) shares rallied Wednesday afternoon in a move that seems to defy both gravity and fundamentals. The electric vehicle maker is climbing with conviction, but don't mistake this for a sudden burst of optimism about the company's prospects. This looks more like short sellers getting nervous before a Federal Reserve announcement.
The Setup: When Everyone's Betting Against You
Wednesday's rally represents a sharp reversal from Tuesday's losses, which followed a brutal Morgan Stanley downgrade. Analyst Andrew Percoco slashed his price target to $10 and projected EBIT losses persisting through 2031, warning of an extended "EV winter." Not exactly the kind of research note that inspires confidence.
But here's where it gets interesting. According to market data released Wednesday, Lucid ranks among the market's most heavily shorted stocks, with short interest hitting 52.70%. That's more than half the float betting against the company. When you pack that many bears into one trade, you create what market veterans call a "coiled spring effect."
The Squeeze Mechanism
Short sellers facing a major Fed decision have a problem. They're holding massive bearish positions on a volatile, high-beta stock right before Jerome Powell speaks. The prudent move? Start covering those positions to reduce risk exposure. And when shorts cover, they buy shares, which pushes prices higher, which forces more shorts to cover. Classic squeeze dynamics.
The broader market has priced in a 25-basis-point rate cut this afternoon, but traders are really focused on the updated "dot plot" projections. Analysts at 22V Research are warning of a hawkish cut, suggesting the Fed may signal a pause in easing for 2026. For companies like Lucid, Powell's tone matters enormously.
The Technical Picture Remains Ugly
Despite Wednesday's surge, the charts tell a sobering story. Lucid shares were trading at $13.19, up 5.94% at the time of reporting. But the stock sits roughly 23.7% below its 50-day moving average of $17.41 and about 38.8% below its 200-day moving average of $21.70. Those gaps suggest significant resistance ahead.
Market data shows Lucid retains a surprisingly strong Momentum score of 7.41 despite negative price trends across all timeframes. That's the kind of divergence you see when technical factors overwhelm fundamental reality, at least temporarily.
Wednesday's rally doesn't change the fundamental challenges facing Lucid. It's a reminder that sometimes the most crowded trades unwind at the most inconvenient times, regardless of what the balance sheet says.