QuantumScape Corporation (NYSE: QS) seems to be poised for a price surge as per its latest charts. QuantumScape is a renewable energy company that develops next generation solid-state lithium-metal batteries for use in electric vehicles.
Bullish Indications
#1 Falling Wedge Pattern Breakout: As you can see from the daily chart, the stock was trading within a falling wedge pattern during the past few days. This is marked in the daily chart in purple color. Currently, the stock has broken out of the falling wedge pattern. A Falling Wedge Pattern is a bullish pattern. Once the stock breaks out from it, it has the potential to move further up.
QS – Daily Chart
#2 MACD above Signal Line: The daily chart shows that the MACD line (blue color) is currently above the signal line (orange color). This is a possible bullish setup.
#3 Above MA: In the daily chart, the stock is currently trading above its short-term moving average of 50-day SMA. This implies that the bulls are currently gaining control.
#4 Bullish ADX and DI: The ADX indicator shows bullishness because the (+DI) line is currently above the (-DI) line and the ADX line has started to rise from below both (+DI) and (-DI) lines. These point to a possible upmove in the near-term.
#5 Bullish Stochastic: The daily chart shows that the %K line (blue color) is currently above the %D line (orange color) in the stochastic indicator, which is a possible bullish sign.
#6 Broken Downtrend: The weekly chart shows that the stock has broken out of the prevailing downtrend and started moving higher. The downtrend line is shown in orange color. A breakout from a downtrend seems like a possible bullish indication. The stock is also trading above a strong support area which is marked as a pink color dotted line. All these are possible bullish signs.
QS – Weekly Chart
#7 Bullish Aroon: The value of Aroon Up (orange line) is above 70 while Aroon Down (blue line) is below 30 in the weekly chart. This indicates possible bullishness.
Recommended Trade (based on the charts)
Buy Levels: If you want to get in on this trade, the ideal buy level for QS is above the price of $29.40.
TP: Our target prices are $35 and $43 in the next 2-6 months.
SL: To limit risk, place stop-loss at $25.70. Note that the stop loss is on a closing basis.
Our target potential upside is 19% to 46% in the next 2-6 months.
For a risk of $3.70, our target rewards are $5.60 and $13.60. This is an almost 1:2 and 1:4 risk-reward trade.
In other words, this trade offers nearly 2x to 4x more potential upside than downside.
Risks to Consider
The stock may reverse its overall trend if it breaks down from the falling wedge pattern with a high volume. The sell-off of the stock could also be triggered in case of any negative news, overall weakness in the market, or any regulatory changes in the sector.
Happy Trading!
Tara
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