QuantumScape (NYSE:QS). For a short while it was the next big thing with Wall Street. Right now, it looks more like a car wreck. But when it comes to tomorrow, can QS stock be resurrected? Let’s take a look at what’s happening off and on the price chart, then offer a risk-adjusted determination based on what we see.
In today’s risk-off environment, QuantumScape has unsurprisingly gone down with the best of them. Riot Blockchain (NASDAQ:RIOT). Opendoor Technologies (NASDAQ:OPEN). Churchill Capital (NYSE:CCIV). Snowflake (NYSE:SNOW), Virgin Galactic (NYSE:SPCE) and many more. If misery loves company QS stock investors are hardly alone.
The good news, if any, some of the aforementioned untouchable stocks will make it to the other side. Determined rate and inflation fears — or a unified reassessment of the fanciful technologies responsible for much of 2021’s toxic unwind — won’t last forever. But whether QS stock will be one of the survivors, unfortunately it’s too soon to know.
To be fair (and mildly reassuring), QuantumScape’s promising so-called Jesus battery technology has its share of influential supporters. Auto giant Volkswagen (OTCMKTS:VWAGY) and Microsoft’s (NASDAQ:MSFT) Bill Gates are among those with stakes in QS. And they’re in it for one reason only. To win. But both can also afford a loss in QS despite the hundreds of millions invested.
Hopefully, QS does succeed. The fact is QuantumScape wants to disruptively change the market for EVs. It wants to produce a next-generation battery capable of making the technology truly mainstream with efficiency, safety and cost effectiveness on a global scale. Think Bangladesh, not just Beverly Hills.
But whether QS succeeds is anybody’s guess. And today QuantumScape’s critics have been winning the battle on the price chart, if nowhere else.
If investors are optimistic and are OK with the fact that QuantumScape has already-committed 10 years and $300 million investment without delivering the equivalent of a battery Hail Mary, then QS stock may be an appropriate riskier investment. And for that investor, a buy today could turn into an even larger and longer-lasting multi-bagger than late 2020’s melt-up.
But should you be prepared to lose it all too? Unequivocally no.
QS Stock Weekly Price Chart
Source: Charts by TradingView
Rest assured Bill Gates and Volkswagen won’t lose sleep over their investments if QuantumScape doesn’t pan out. But for ordinary investors, QS stock and its ups and downs means a great deal more. And despite QuantumScape having given up more than 80% since striking a high of $132.73 six months ago, there isn’t concrete technical evidence to suggest a bottom is nearby.
Today, stochastics have bullishly crossed over in oversold territory. It’s a promising sign. A soft-looking hammer candlestick formed last week and set against the lower Bollinger Band is another potential support. But QS stock still needs to confirm a bottom above $31.22, before and if, shares fall beneath the pattern’s low. Neither is guaranteed of course. An inside candlestick could always form. More important, QS’ price chart isn’t physics with absolute outcomes following whatever type of signal investors rely on. It’s investing.
Bottom line, if you are bullish on QuantumScape my only recommendation would be to smartly take some of the gamble out of QS stock’s significant volatility risk and use it to your advantage with a fully-hedged and reduced risk collar. One such spread which makes sense off and on the price chart, and when compromise is always a consideration, is the Aug $35 put / $45 call combination.
On the date of publication, Chris Tyler 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.
Chris Tyler is a former floor-based, derivatives market maker on the American and Pacific exchanges. For additional market insights and related musings, follow Chris on Twitter @Options_CAT and StockTwits.