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As with most catalysts these days, Lithium Americas (LAC) has President Donald Trump to thank for its blistering performance in the market. Yes, LAC stock is up over 213% on a year-to-date basis but the real story has got to be the trailing-month rally of approximately 192%. That’s a stunning paradigm shift if there ever was one — and it could still relatively be in the early innings.

As The Verge and other publications reported, the Trump administration is taking a 5% equity ownership in Lithium Americas. Of course, the underlying commodity is a crucial component in batteries, especially for applications involving clean energy such as electric vehicles and solar systems. With the investment in LAC stock, the White House has taken a more assertive role in managing domestic supply chains for critical materials.

Naturally, LAC stock soared on the disclosure, along with other high-level fundamentals. However, because of the extreme rally, speculators on the other side of the table have entered the fray. According to Fintel, the short interest of LAC stands at 13.38% of the float. Generally, a short interest of 10% or higher represents a warning sign that the targeted security could tumble due to the bearish pressure.

Now, it should be noted that short interest could very well comprise non-bearish activities, such as hedging or market making. However, it's the broader trend that’s intriguing. For example, in late April of last year, the short interest was 7.5% of the float.

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Moreover, between October 2023 to the current month, the correlation coefficient between the LAC stock price and its short interest landed at -56.4%. Basically, as short interest rose, the price declined. However, in recent sessions, the relationship has incurred somewhat of a polarity flip: LAC has mooned while short interest has also ticked northward, albeit at a much shallower angle.

Still, with today’s big drop in LAC stock, more speculators could be enticed with the bearish argument. That could be a trap because the elevated short interest would give the bulls another reason to jump back in: the potential for a short squeeze.

As such, the volatility in LAC stock might not be a harbinger of doom; instead, it could very well provide the green light for the bulls.

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