QuantumScape’s stock has made a comeback similar to GameStop. QS shares have soared up to $14.22 – a 315% increase from their lowest point in the year. This makes it one of Wall Street’s best performers. The article below explains the reasons why QS shares have risen and will soon plunge.
QuantumScape Stock Surged
The QS share price surged over the last few weeks for two reasons. The first surge was triggered after QS announced it had reached a significant milestone in scaling up its production capability.
QuantumScape has successfully integrated its Cobra separator technology into the production of its base cell. Cobra allows for a faster, more efficient and energy-efficient production process with less equipment compared to Raptor. According to the company:
Cobra, an innovation that has revolutionized ceramic processing, is capable of a significant improvement in productivity over Raptor. Raptor was already a substantial advancement in comparison to previous generations.
This process is expected to help the company become a major player in the industry of solid-state batteries, analysts believe that they will be crucial in the industry of electric vehicles.
The batteries have better performance than those currently available because they are faster to charge and offer a greater range.
The QS share price soared due to a squeeze amongst investors, as it was one of the companies that were most heavily shorted. The company’s short interest is 13.6% which is more than the average. The short squeeze is similar to that experienced by GameStop in 2021 and AMC.
Stock rallys and QS stocks: Risks
Three key factors could cause the QuantumScape share price to crash in the near future. History shows that stock prices of companies who have gone through a show that stocks which go through short-squeezes often plummet after momentum has faded. GameStop, for example, and AMC Entertainment remain much lower than the peak they reached in 2021.
There are also signs of insiders at QuantumScape selling stock. This is an alarming sign. They have sold more than 5.6 millions shares over the past 12 months.
The company is also facing stiff competition in the battery market from Chinese firms. BYD has teamed up with CATL to create a battery which can be charged in five minutes, and then travel hundreds of miles.
QuantumScape is heavily dependent on Volkswagen as well, which has been a significant investor. It is possible that QuantumScape may choose to use other suppliers of batteries, as it will be a while before QuantumScape’s batteries are at scale.
QuantumScape Stock Price Analysis
On the daily chart, it is clear that QS’s stock also surged due to a technical factor. The chart formed a rising wedge pattern, which is a bullish reversal signal.
Stocks are at risk for a reversal as they have become overbought. The Relative Strength Index has risen to 90. In the last few months, other oscillators also rose.
It has also deviated significantly from moving averages. It could soon experience a mean-reversion where the asset returns to its historic averages. It could drop as low as $10, which was the biggest swing of January 2017.
The ICD published the article Why QuantumScape Stock Price Jumped and Why it May Crash Soon.
