It's no secret that electric-vehicle manufacturer Lucid Group (LCID) is a mess. Sure, since hitting an apparent near-term bottom on Sept. 4, LCID stock has jumped 26%. But that's not going to get rid of the bad taste stemming from the year-to-date loss of roughly 33%. What's more, in the trailing five years, LCID has stumbled over 79%.
When Lucid first entered the EV fray, it potentially offered viable competition to Tesla (TSLA). While the latter had become synonymous with next-generation mobility, its vehicles suffered from an unchanging design motif. With Lucid, the brand brought in much-needed dynamism to the ecosystem. Unfortunately, a fading rate of growth and expanding losses haven't endeared Lucid to investors.
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Subsequently, LCID stock is one of the ugliest securities in terms of technical resilience. Right now, the Barchart Technical Opinion indicator rates LCID as an 88% Strong Sell -- not exactly a ringing endorsement. And while I'm not too big on so-called expert ratings, Wall Street analysts rate shares as a Hold.
Basically, nobody wants to outright say LCID stock is a "sell" for diplomatic reasons. However, out of 14 analysts, only two rate it positively (interestingly, both as a Strong Buy).
For arguably most investors, the kicker is the extremely high short interest against LCID stock, which stands at 30.64% of its float, per Fintel. Also, the short interest ratio clocks in at 5.41 days to cover, which effectively means that bearish traders will need over an entire business week to fully unwind their short exposure.
If that wasn't enough, the off-exchange short volume ratio clocks in at 61.31%. While analyzing alternative trading systems or dark pools is extremely difficult business, the elevated off-exchange metric suggests that the pros are among the most skeptical of LCID stock.
So far, they've been right -- but the diminishing returns on the short side may imply a possible sentiment reversal.
LCID Stock is a Stand-In for an Enticing Lottery Ticket
To better appreciate the power of the contrarian pull of elevated short interest, you must understand that a true short position is inherently a credit-based transaction. This means that there's a contractual obligation tied to the underwritten risk being fully realized. A debit-based bearish strategy, on the other hand, has already paid the principal upfront.