Thursday has found bulls charging into shares of EV battery play QuantumScape (NYSE:QS). QS stock ended Feb. 23 at $14.11 and has soared over the course of Feb. 24.
But does the agitated optimism warrant a purchase of QS stock in investors’ portfolios?
Let’s take a look at what’s happening both off and on the price chart of QuantumScape, then offer a risk-adjusted determination aligned with those findings.
Is QuantumScape a Bull Among Bears?
It’s official. This decade’s bullish Roaring ‘20s redux has been given another setback.
The Nasdaq’s dismal 2022 is now officially a bear market.
Other benchmarks aren’t doing much better.
The Dow Jones Industrial Average has confirmed its correction status, while the S&P 500 is somewhere in-between after making new relative lows on the session.
The same can’t altogether be said for next-gen battery outfit QS stock, though.
After a financial misstep out-the-gate Thursday, shares snapped back aggressively from losses of around 6% to a gain of about 7%.
But while QuantumScape is leading the market, aside from the energy complex, one day doesn’t make a trend.
And unlike the broader averages, in a market made up of stocks, QS stock has been in a determined bear market cycle for more than a year.
Since December 2020’s peak of $132.73, QuantumScape trades for around $15 a share.
But today is today, right? And, you might say, all bull markets have to start somewhere.
True, and like EV peers Tesla (NASDAQ:TSLA), Rivian Automotive (NASDAQ:RIVN) or ChargePoint Holdings (NYSE:CHPT) and others, Thursday’s revised ruling by Wall Street could be a larger trigger to rally the group around higher oil prices.
But probably not. Sorry.
That’s more true for an EV technology that’s still a couple years from possibly ever being commercially viable. And that’s the state of things in QS stock.
And while Microsoft’s (NASDAQ:MSFT) Bill Gates and Volkswagen (OTCMKTS:VWAGY) have opened their wallets as early and ongoing partners with QuantumScape, that’s not enough to make QS stock a buy today either.
QS Stock Weekly Price Chart
Source: Charts by TradingView
That’s not to say QS stock isn’t a buy. As a smaller spec investment, the argument can certainly be made.
But I’m not seeing that type of positional advantage on the price chart right now.
Today, a bear flag could be taking shape. And with a weakening and neutralized stochastics in motion, don’t think for a second that a substantially lower QS stock isn’t possible.
What’s the downside? At $10 or $11 bucks, QuantumScape would still be valued as a mid-cap north of $4 billion.
That’s significant given the make-or-break stakes and an outcome that’s still a couple years out. And there’s no guarantees a bottom would come to the rescue.
Just ask investors of rival Solid Power (NASDAQ:SLDP) or any number of even more challenged SPACs (special purpose acquisition companies) than QS stock.
What I continue to observe, though, is a more volatile stock in QuantumScape shares.
A long QS stock position that’s collared with options to hedge risk and allow for more active management of risk arguably makes sense.
Bottom line, that’s the pony I’d bet has a better shot at making the winner’s circle regardless of a shiny new battery champion or an alternative reality that rains on QuantumScape’s ambitions.
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.