The volatility in Lucid Motors (NASDAQ:LCID) has been increasing. That’s not too surprising given the run we’ve seen in LCID stock lately. At today’s price of $37.71, shares are up more than 130% from the Sept. 1 low. 

The simple fact is that Lucid has been on fire. Even as other stocks — like Ford (NYSE:F) and Tesla (NASDAQ:TSLA) — have been doing well, virtually no other electric vehicle (EV) or automotive stock is up as much as Lucid in the last few months.

What’s got the rally going? 

Speculation as to whether this company can be “the next Tesla” sure has fired up the bull camp. Additionally, the company recently began delivering its Lucid Air model to customers as they start to roll off the production line. 

MotorTrend recently named this vehicle the Car of the Year, too. With more than 500 miles of driving range and 1,100 horsepower, there’s good reason to take Lucid seriously, even if there are other risks on the table.

Perhaps the biggest risk, however, is the U.S. Securities and Exchange Commission (SEC) has just subpoenaed Lucid. 

The SEC and Lucid 

On Monday Dec. 6, shares of Lucid Motors gapped down hard, falling 19.5% at one point, after disclosing an inquiry from the SEC. 

Specifically, the SEC subpoena “may be probing elements of the company’s SPAC deal.”

That’s not what you want to hear as an investor. Any sort of fraud, subpoena, or accounting issues are big red flags. That doesn’t mean that they will turn up any wrongdoings and it’s not as if that risk wasn’t present before. Any company — be it Apple (NASDAQ:AAPL), Ford, Tesla, or Lucid — could get hit with a Department of Justice or SEC inquiry. However, for Lucid, that risk is now publicly disclosed, which means it will likely be reflected in the stock price until it’s resolved. 

For the record, that resolution can be either good or bad. 

As per the SEC subpoena, it seems to be aimed at the SPAC deal, and not necessarily the company itself. It states in an 8K filing: 

“?Although there is no assurance as to the scope or outcome of this matter, the investigation appears to concern the business combination between the Company (f/k/a Churchill Capital Corp. IV) and Atieva, Inc. and certain projections and statements.”

Trading LCID Stock

On Sep. 1, Lucid stock was hammered. However, a strong reversal trade came about in this name, providing an excellent buying opportunity. Slowly but surely, it continued to press higher from there, ultimately running into the $27 to $29 resistance area. 

While LCID stock struggled with this area, the stock eventually erupted through $30 and ultimately ran to the $55 area. It did have some momentary pushes through this level, but the rallies were fleeting and losing steam. 

The SEC subpoena news hit the stock as it was already showing signs of wavering. At the time, Lucid stock was down four days in a row and struggling to hold the 61.8% retracement and the 21-day moving average. 

The stock started off the week under severe pressure, but found its footing near the 10-week moving average. 

Now What — New Highs Or Topped Out?

New highs are possible but they won’t be easy.  The rebound off the post-SEC subpoena lows was good. The fade on Tuesday, Dec. 7 is not, particularly when the Nasdaq was up about 3% on the day. 

The charts are not difficult to navigate, but the headlines could be. Although I don’t expect a huge fallout over the current inquiry, I do think Lucid is now more vulnerable to the headlines. 

Over the 61.8% retracement puts its short-term moving averages in play, then $50. Above $50 is necessary to put the 78.6% retracement and $55-plus area back in play. 

On a further decline, watch the 10-week moving average. Below that mark puts this month’s low in play at $38.06, along with the 50-day moving average. A break of both of these measures could put the $29 to $30 breakout area back in play.

On the date of publication, Bret Kenwell did not have (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.

Bret Kenwell is the manager and author of Future Blue Chips and is on Twitter @BretKenwell.