Is a giant short squeeze coming for Mullen (MULN) stocks?

Shares of Mullen Automotive (NASDAQ:MULN) have been trending for weeks. That’s when investors eagerly await an update from the company on deliveries and production. This is also when traders are speculating on a possible short-term squeeze for MULN shares.

Meanwhile, several electric vehicle (EV) stocks have struggled lately. You’re here (NASDAQ:TSLA) recently hit a 52-week low as investors juggle CEO Elon Musk’s takeover of Twitter. Lucid Engines (NASDAQ:LCID) continues to make new lows, while Rivian (NASDAQ:SHORE), Fisker (NYSE:FSR) and others continue to struggle.

Chinese electric vehicle stocks like Nio (NYSE:NIO) and Li-Auto (NASDAQ:LI) have done well in recent weeks. Overall, however, electric vehicle stocks have struggled this year.

As for the MULN stock, it has been far from spectacular this year. Shares hit a new 52-week low on Dec. 7 at 18 cents. Since the start of the year, the stock has fallen by more than 96%. This is generally not a recipe for a winning stock pick.

Short Squeeze on Deck for MULN Stock?

When a stock is hated and the sellers are in control, it’s like sharks smelling blood in the water. Investors continue to pile on the short side, looking to squeeze every drop of profit from the stock as its price falls.

The misery of bulls is a playground for bears.

However, there are times when the scale becomes so unbalanced that it causes what is called a short squeeze. Simply put, when too many traders hold a short position in a certain security and the price of that security starts to rise significantly, it triggers a buying wave. This happens when the two natural buyers – the bulls – buy the stock and like shorts should buy to cover their post.

Now some are start speculating it could happen in MULN stock.

MarketWatch data shows 47% short interest. However, other sites only suggest a short interest of 10% to 12%. That said, the Nasdaq shows about 175.5 million shares sold short as of November 30. As of the last 10-Q filed, the company had approximately 376.7 million shares outstanding.

Either way, it usually helps when there’s a catalyst or event to help trigger a short squeeze. Could this be the company’s proposed stock split? Maybe, but maybe unlikely. Additionally, the company has already closed its deal for Electric Last Mile Solutions.

Remember that in October, MULN stock nearly tripled in just a few trading sessions. This came after it was announced that I-GO EV had been granted exclusive distribution rights in Europe. Will a similar price action happen again? Who knows, but it’s possible under the right circumstances.

As of the date of publication, Bret Kenwell had (neither directly nor indirectly) any position in the securities mentioned in this article. The opinions expressed in this article are those of the author, subject to InvestorPlace.com publishing guidelines.