PreMarket Prep Stock Of The Day: Lordstown Motors

Benzinga's PreMarket Prep airs every morning from 8-9 a.m. ET. During that fast-paced, highly informative hour, traders and investors tune in to get the major news of the day, the catalysts behind those moves and the corresponding price action for the upcoming session.

On any given day, the show will cover at least 20 stocks determined by co-hosts Joel Elconin and Dennis Dick along with producer Spencer Israel.

When a stock is in an extended decline and attempts to rally, it doesn't take much to derail the move higher. A great example of this is the price action in Lordstown Motors RIDE, which makes it the PreMarket Prep Stock Of The Day and is in red following a downgrade by Wolfe Research

The Company: Lordstown Motors Corp is an automotive company founded for the purpose of developing and manufacturing light-duty electric trucks targeted for sale to fleet customers. The company has been developing its flagship vehicle, the Endurance, an electric full-size pickup truck.

Extremely Volatile: From September through February, the issue had monthly ranges anywhere from $11.50 to $17.75. For an $11-$31 stock, that's plenty of whipsaw action. While the lows during that period were in a wide range, four of the six monthly highs stick out like a sore thumb. In September the issue peaked at $31.80, November at $30.75, January at $30.74 and February at $31.57.

The Last Hurrah: On Feb. 11, the issue peaked at $31.75 and backed off to end the session at $30.75 and then the wheels came off the wagon. The following day, Adam Jonas of Morgan Stanley initiated coverage of the issue with an Underweight rating and price target of $18, nearly $14 below the previous day's closing price.

In the following session, the issue swooned from $30.75 to $26.91 and was never able to recover.

Short Seller Attack: With the issue already in freefall, closing March 11 at $17.71, Hindenburg Research attacked the company. The short seller went for the jugular when it alleged fraud in its business operations. That instigated another leg lower, as the issue swooned from $17.71 to $14.78 on March 12.

After the accusation, any and all rallies were met with a barrage of sellers that were stuck long the issue at much higher levels.

The Final Straw: With your stock in the tank, the last thing a company wants to do is have another blunder and that's exactly what happened. In order to showcase its flagship product, the electric pick-up Endurance, the company competed in a 250-mile off-road desert race. Unfortunately, for shareholders, the truck only completed 40 miles of the race.

That instigated a move lower from $10.02 to $9.20 on April 19.

Finds A Bottom And Rallies: Finally, on May 13, Lordstown bottomed at $6.70 and rebounded to end the session at $7.33.

A four-day rally took the issue as high as $11.65 in Wednesday’s session and closed just off it at $11.45 for a tidy 64% rally.

The Ax: Before today's open, Wolfe Research downgraded the issue from Peer Perform to Underperform and slashed its price target from $18 to $1. With the truck loaded up with longs after the stealth rally, the issue is under pressure in Thursday's session. After a lower open, it bounded to $10.74 and resumed its move lower.

As of 1:30 p.m., it has found buyers just above Wednesday’s low ($9.61), sitting around $9.94 at time of publication. The stock hit an intraday high of $10.44.

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