PreMarket Prep Stock Of The Day: Lucid Group

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 an issue embarks on a major rally, it is difficult to determine when, if ever, and where it will come to an end. While selling on the way up at a predetermined target may be regretted as the issue continues higher, when a stock turns, it is much more difficult to exit into a cascading market. As a result, the exit may look a whole lot better.

The aforementioned scenario definitely apples to Lucid Group Inc. LCID, which is the PreMarket Prep Stock of the Day.

The Company: Lucid Group is a technology and automotive company developing next-generation electric vehicle technologies. It's a vertically integrated company that designs, engineers and builds electric vehicles, EV powertrains and battery systems in-house.

The Lockup Expiration Low: Sept. 1 was the first day some of the company’s biggest shareholders (PIPE investors) were eligible to sell their stock since the company’s SPAC merger in July.

In anticipation of large blocks of stock coming for sale, the Street attempted to front-run the sales. From July 26-Aug. 31 (the day before lockup expiration), the issue shed 20% off its share price, from $26.83 to $19.96.

Interestingly, the issue opened at its dead low for the move ($16.12) on the expiration day and reduced what was nearly a $4 loss into a $2.17 loss ($19.86 to $17.79).

It should be noted the closing price was not revisited, as the issue bottomed at $18 the following day and embarked on a major rally.

Lucid's Timely Upgrade: A four-day winning streak followed and the issue clawed back to the area of its closing price pre-lockup expiration. ($19.89 vs. $19.96). The rally took a breather Sept. 8, declining by just under $1 to $18.93.

Before the open Sept. 9, Citigroup analyst Itay Michaeli initiated coverage on the stock with a Buy rating and announced a $28 price target. That instigated a rally back to $19.85, and after a few days of indecision, the rally was on in earnest.

Lucid's 5-Day Winning Streak: Over the last five sessions, Lucid Group has been on a tear. On Tuesday, it reached its highest level since July 26, peaking at $27.93, but retreated to end the session at $26.81. That matched its close from July 26, which was right before it started to unravel.

An important factor during that five-day run was the announcement that the company's Lucid Air Dream Edition Range received an official EPA rating of 520 miles of range, the highest on record for an EV. 

PreMarket Prep's Take: When the issue was being covered on the show Wednesday, it was trading at the $27.50 area. Co-host Dennis Dick said the issue was definitely "overbought" at the level, adding that “it is hard to short a rocket ship.”

Dick said: “If I was long I would ring the register.” He cited Tuesday’s high ($27.93) as a potential resistance point.

LCID Price Action: After a higher open, Lucid surpassed Tuesday’s high, rallying to $28.21, and sharply reversed course. As of 12:30 PM EST, the ensuing decline has found support ahead of Tuesday’s low ($24.57). The stock was down 7.18% at $24.88 late in the session.