Mullen Automotive's 28% Plunge: A Technical Sell-Off or Hidden Forces?

Technical Signal Analysis

Today’s only triggered signal was RSI oversold, which typically suggests a stock is undervalued and due for a rebound. However, Mullen Automotive’s (MULN.O) price crashed -28%, defying this indicator. Here’s the breakdown:

• RSI oversold (triggered):
• RSI below 30 signals extreme undervaluation, often leading to buying opportunities.

• Paradoxically, the stock’s collapse suggests forced selling overwhelmed the "oversold" safety net.

• Other signals (no triggers):

• No head-and-shoulders, double tops/bottoms, or MACD death/crossovers. This means no clear trend-reversal patterns were forming.
• The market ignored classic reversal signals, focusing instead on technical exhaustion or external factors.

Order-Flow Breakdown

Despite the massive 1.35 million shares traded, no block trading data was recorded. This hints at:
1. Retail-driven panic selling: Small trades accumulating into a sharp drop, possibly due to fear of further losses.
2. Algorithmic liquidation: High volume with no institutional block trades could reflect automated systems dumping positions as prices fell.

Without major buy/sell clusters, the move appears disorganized, likely a result of speculative investors exiting en masse.

Peer Comparison

Related EV/theme stocks showed mixed performance, undermining the idea of a sector-wide sell-off:

Conclusion: The sell-off was idiosyncratic to Mullen, not the sector.

Hypothesis Formation

Two theories best explain the crash:

1. Technical Exhaustion + Algorithmic Sell-Off
2. The RSI oversold signal may have lured traders into a false sense of safety.
3. As prices dipped below key support levels (unseen in data), algorithms triggered stop-loss orders, cascading into a death spiral.

4. Data point: High volume with no block trades aligns with retail-driven liquidation.

5. Retail Panic Amid Volatility

6. Mullen’s tiny market cap ($4.38M) makes it vulnerable to speculative swings.
7. Traders may have sold preemptively due to fear of further declines, even without news.

Insert a 1-day price chart with RSI overlay. Highlight the RSI dipping below 30 while the stock crashed, showing the divergence between indicator and price.

A backtest of RSI oversold signals on MULN.O over the past year would reveal if this indicator has historically been reliable. If false positives are common, it strengthens the case that today’s drop was due to external factors.

Final Analysis

Mullen’s 28% plunge was a self-fulfilling technical collapse, fueled by:
- The RSI oversold signal attracting traders who then panicked as prices fell further.
- High retail volume overwhelming the stock’s liquidity.
- No sector-wide issues to justify the drop.

Actionable Takeaway: Short-term traders might consider buying if the RSI stabilizes, but institutional investors should avoid until clarity emerges.