It’s been a volatile, bumpy right for QuantumScape (NYSE:QS) stock. In November, this was a $12 stock. By late December, QS stock had cleared $100.
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Now shares have been on a painful pullback, but it’s looking more and more likely that QuantumScape is setting up to be a trading vehicle. That is, investing in this name may be difficult for the time being. However, traders should be able to find value here, playing the stock between its wide ranges.
Lately, it’s been in a downtrend and an ugly one at that.
QS stock topped out at $132.73 on Dec. 22. After a couple of days of sideways action, shares fell more than 55% over a four-day stretch. That big decline was punctuated by a one-day dip of 40% on Jan. 4, the first trading day of 2021.
Things haven’t gotten much easier for the bulls, either.
QS stock is working on its first positive week after five straight weekly declines. In that stretch, shares fell in 19 of 23 trading sessions, before rallying over the last several days. Let’s take a closer look at the chart.
Trading QS Stock
First, traders need to know their strengths and weaknesses. If they can’t play both sides of the tape — meaning long and short — they need to know how to ride a winner and let it set back up again.
With QS stock, notice how shares broke out over the prior high at $25.75, then continued to find the 10-day moving average as support along the way. This moving average helped ignite shares higher after each dip or consolidation.
In December, it only provided a feeble bounce before failing two days later. Since then, it’s been resistance, rejecting QS stock each time it tries to get going. When the stock lost this mark, that was when it was time for bulls to get flat and wait for QuantumScape to set up again on the long side.
Is it now?
It’s trying, but it’s not out of the woods yet. After pushing through the 10-day, QS stock was rejected by the 21-day moving average, then lost the 10-day in the following session. I’m not convinced yet.
This may have one more leg to the downside left. Maybe it takes out the recent low and tests the 100-day moving average near $37.50 before finding support. Perhaps it’s down to the $30 area, or even the prior breakout level near $26.
While this momentum stock has lost its momentum, it doesn’t look like it’s heading straight for the trash can. For now, let’s trade the range in QS stock, with buyers likely stepping in in the $30 to $40 area, and sellers between $85 and $100.
Is QuantumScape Worth Owning?
That brings us to the next question, which is whether QuantumScape is worth owning. The company couldn’t have picked a better time for relevancy, with almost all things electric-vehicle (EV) related flying higher.
The California-based company was founded in 2010 and works on solid-state battery technology. If the company’s product pans out, this could be the real deal. Check this out:
The solution to [current EV battery] problems has been known for decades: It’s called a solid-state battery, and it’s based on a deceptively simple idea.
Instead of a conventional liquid electrolyte—the stuff that ferries lithium ions between electrodes—it uses a solid electrolyte. Also, the battery’s negative terminal, called its anode, is made from pure lithium metal.
This combination would send its energy density through the roof, enable ultra-fast charging, and would eliminate the risk of battery fires.
As a result of QuantumScape’s efforts, the company has apparently cracked the code on solid-state batteries.
According to QuantumScape’s data, its cell can charge to 80 percent of capacity in 15 minutes, it retains more than 80 percent of its capacity after 800 charging cycles, it’s noncombustible, and it has a volumetric energy density of more than 1,000 watt-hours per liter at the cell level, which is nearly double the energy density of top-shelf commercial lithium-ion cells.
The company is founder-led by Jagdeep Singh and he has an impressive list of board members. Specifically, JB Straubel is on the board, a co-founder of the now-largest automaker on earth (by market capitalization). Brad Buss is also on the board, who is a former board member of that automaker as well.
QuantumScape also has two board members from Volkswagen, a company that’s also invested in QuantumScape.
Is QuantumScape a slam dunk? No. In terms of the public market, it’s a relatively new company without a lot of coverage. Its stock is volatile too. But it may be a worthwhile speculative play for those willing and disciplined enough to trade it. Perhaps over time it will develop into a more stable investment.
On the date of publication, neither Matt McCall nor the InvestorPlace Research Staff member primarily responsible for this article held (either directly or indirectly) any positions in the securities mentioned in this article.
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