If This Stock Breaks Out, Buy It!

Lucid Group Inc. (NASDAQ: LCID) seems to be getting ready for a price bump as per the latest charts. Lucid Group, Inc. is an American electric vehicle manufacturer headquartered in Newark, California, United States. Lucid’s other divisions include energy storage and original equipment manufacturing.

Bullish Move – Chart Indications

#1 Consolidation Area: The daily chart shows that the stock has been trading within a range for the past several months. This area is marked as a pink color rectangle in the daily chart. A breakout from this consolidation area would indicate possible bullishness.

LCID – Daily Chart

#2 Above MAs: The stock is currently trading above its 50-day SMA as well as 200-day SMA. This indicates overall bullishness for the stock.

#3 Bullish Aroon: The value of Aroon Up (orange line) is above 70 while Aroon Down (blue line) is below 30. This indicates bullishness.

#4 MACD above Signal Line: As you can see from the daily chart, the MACD line (blue color) is currently above the signal line (orange color). This indicates a possible bullish bias.

#5 Bullish ADX and DI: The ADX line is currently moving up from below –DI and +DI lines in the daily chart. The +DI line and the ADX line are also currently above the –DI line. This indicates possible bullishness.

#6 Double Bottom Pattern: The weekly chart shows that the stock is currently forming a double bottom pattern. This is marked in orange color. A double bottom pattern is a strong bullish pattern and a breakout from it would indicate that the stock could surge higher.

LCID – Weekly Chart

#7 Strong RSI: Relative strength index (RSI) is currently above 50 and moving higher. This indicates the strength of the current upmove.

#8 Bullish Stoch: In the weekly chart, the %K line of the stochastic has crossed above the %D line, indicating possible bullishness.

Recommended Trade (based on the charts)

Buy Levels: If you want to get in on this trade, the ideal buy level for LCID is above the price of $31.00. This is marked as a green color dotted line. However, you can purchase half the intended quantity of shares of LCID above the breakout level of the double bottom pattern, at around $27.00.

TP: Our target prices are $35 and $45 in the next 2-6 months.

SL: To limit risk, place a stop loss near $22.00 (for entry near $27.00) and $28.40 (for entry near $31.00). Note that the stop loss is on a closing basis.

Our target potential upside is 12% to 67% in the next 2-6 months.

  • Entry near $27.00: For a risk of $5.00, our first target reward is $8.00 and the second target reward is $18.00. This is a nearly 1:2 and 1:4 risk-reward trade.
  • Entry near $31.00: For a risk of $2.60, our first target reward is $4.00 and the second target reward is $14.00. This is a nearly 1:2 and 1:5 risk-reward trade.

In other words, this trade offers 2x to 5x more potential upside than downside.

Risks to Consider
The stock may reverse its overall trend if it breaks down from the double bottom pattern with high volume. The sell-off of the stock could also be triggered in case of any negative news, overall weakness in the market, or any regulatory changes in the sector.

Happy Trading!

— Tara

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