Lucid Group, Inc (NASDAQ:LCID)'s rally Tuesday is confirming the stock has reversed course into an uptrend.
An uptrend occurs when a stock consistently makes a series of higher highs and higher lows on the chart.
The higher highs indicate the bulls are in control while the intermittent higher lows indicate consolidation periods. Traders can use moving averages to help identify an uptrend, with rising lower timeframe moving averages (such as the eight-day or 21-day exponential moving averages) indicating the stock is in a steep shorter-term uptrend. Rising longer-term moving averages (such as the 200-day simple moving average) indicate a long-term uptrend.
A stock often signals when the higher high is in by printing a reversal candlestick such as a doji, bearish engulfing or hanging man candlestick. Likewise, the higher low could be signaled when a doji, morning star or hammer candlestick is printed. Moreover, the higher highs and higher lows often take place at resistance and support levels.
In an uptrend, the "trend is your friend" until it’s not, and in an uptrend there are ways for both bullish and bearish traders to participate in the stock:
- Bullish traders who are already holding a position in a stock can feel confident the uptrend will continue unless the stock makes a lower low. Traders looking to take a position in a stock trading in an uptrend can usually find the safest entry on the higher low.
- Bearish traders can enter the trade on the higher high and exit on the pullback. These traders can also enter when the uptrend breaks and the stock makes a lower low, indicating a reversal into a downtrend may be in the cards.
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The Lucid Chart: Lucid confirmed its new uptrend on Tuesday by printing a higher high above the high of $27.25 formed on March 22. The stock’s most recent higher low was created on March 25 at $24.52, and as long as Lucid remains above that level when it prints the next higher low, the uptrend will remain intact.
- If Lucid closes the trading session near its high-of-day, it will print a bullish Marubozu candlestick on the daily chart, which could indicate higher prices are likely to come again on Wednesday. If the stock closes the trading day below the $27 level, the daily candle will have a long upper wick, which could indicate the next higher low will come on Wednesday.
- On Tuesday, Lucid attempted to regain the 50-day simple moving average (SMA) as support but was rejecting from the area. Bulls will want to see Lucid regain the 50-day on Wednesday, which would indicate longer-term sentiment has become bullish.
- Lucid’s move higher came on higher-than-average volume, which indicates a high level of trader and investor interest has returned to the stock. As of midafternoon, over 26 million shares of Lucid had exchanged hands compared to the 10-day average of 22.45 million. Bulls will want to see continued momentum on Wednesday.
- Lucid has resistance above at $30 and $35.72 and support below at $25.81 and $20.90.
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