The Federal Reserve might be easing its foot off the broader market’s gas pedal. But when it comes to QuantumScape (NYSE:QS) stock, conditions are looking positively charged for big-time profits.
With that in mind, let’s explore a bit of what’s happening off and on the price chart of QS stock. Then, we will offer a risk-adjusted determination aligned with those findings.
Just this week, a decision from the Fed to taper its longstanding commitment in the bond market has been a major story. And this news has provided fuel for a handful of stocks in return.
Not that anyone is paying any mind or can be found quickly giving reasons as to why the move is a positive for stocks. Yet, in the scheme of things those developments, good or bad, have little to do with QS stock.
Since going public via a special purpose acquisition company (SPAC) deal with Kensington Capital less than a year ago, QuantumScape has been largely detached from broader stock averages sporting double-digit gains and hitting record highs in 2021. And this applies to both positive and negative moves for QS stock.
From a rapid stock ascent in the fourth quarter of 2020, to this year’s implosion that saw QS stock shed 80% from its peak share price of $132.73 by mid-August, make no mistake this isn’t a well-correlated stock like Microsoft (NASDAQ:MSFT) or Home Depot (NYSE:HD).
The other thing is this: QuamtumScape is a pre-sales and untested concept-stage venture aiming to jumpstart electric vehicles’ (EVs) still-apparent battery shortcomings with next-gen multilayer, solid state technology.
If it pans out, expect a multi-bagger opportunity to unfold. However, QS stock is not for those that wait for traditional metrics to play out.
QuantumScape’s sales black hole is going to remain a reality for QS stock investors for the foreseeable future. The outfit doesn’t expect a working battery for deployment into partner Volkswagen’s (OTCMKTS:VWAGY) EVs before 2024 and maybe not until 2025.
The good news, though? QuantumScape’s obvious request from shareholders to have patience isn’t necessarily a bad thing. The stock market is about future expectations and pricing shares with forward-looking efficiency, right?
And by the time QuantumScape looks even remotely close to making good on rolling out real world batteries, the current share price near $30.60 is likely to look like a gift.
There’s no guarantees of course. But so far, so good.
In fact, last week, QuantumScape received third-party proof of its own successful single layer testing made public this past December. And rightfully, it stung QS stock’s 15% short interest to the tune of nearly 14% in the report’s aftermath.
There’s more to be upbeat regarding QuantumScape’s chances going forward, too.
Additionally, as InvestorPlace’s Faizan Farooque smartly noted, QS stock also has roughly $1.5 billion in cash on hand to continue improving on that technology without raising capital and ultimately achieving road-ready batteries critical to further greening the planet.
QS Stock Weekly Price Chart
Overall, the illustrated weekly QS stock chart is largely in agreement that the road going forward looks increasingly for investors to buy shares.
With this past week’s favorable news and bullish reaction, shares of QuantumScape have staged a pinched Bollinger Band and tight congestion pattern breakout.
Moreover, secondary confirmation from a stochastics crossover is also acting as a support for higher prices and an emerging bullish cycle for QS stock.
Optimistically, a double or even a triple in price in the next 12 to 18 months isn’t out of the question given the size of QS stock’s correction this year.
To be fair, even if our outlook proves more accurate than not, QuantumScape’s reputation for significant volatility and possibility for more challenging counter swings in shares shouldn’t be ignored. In fact, they should be embraced!
Overall, and as I’ll continue to recommend to bullish investors, QuantumScape’s heady zigs and zags in stock price should be exploited using an actively-traded longer-term collar strategy on shares. One favored, fully-hedged vehicle of this type of spread is the December $25/$35 collar.
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.