Just because a stock goes higher, doesn't mean it should, Cramer reminded viewers of Mad Money Thursday night. A few weeks ago, Cramer highlighted some electric vehicle (EV) startups that were coming public via reverse mergers with special purpose acquisition companies, or SPACs. But now, Cramer said this group has gone parabolic and it's time to sell.
Solid-state battery maker QuantumScape Corporation (QS) was first on Cramer's list. He said this stock now trades at a ridiculously high valuation.
Let's check out a couple charts on QS.
In the daily Japanese candlestick chart of QS, below, we can see the past couple of months of trading. The shares soared from near $10 to over $85 in just a few weeks. Only nimble traders need apply. Prices are above the rising 20-day moving average line and the rising 50-day moving average line. With less price history to work with we shorten the moving averages we select. The chart shows a very large high-wave candle last week. This pattern can foreshadow a market turn and in this case the turn looks to be from up to down.
Trading volume was extremely heavy the day prices made the high-wave pattern. The On-Balance-Volume (OBV) line has started to turn lower and the 12-day price momentum study shows that lower bars in recent sessions tell us that upside momentum has likely peaked.
In this daily Point and Figure chart of QS, below, we can see that prices left the projected price target of $40 in the dust.
Bottom-line strategy: These two charts of QS (above) do show a parabolic advance that is in the process of correcting to the downside. Early buyers appear to be exiting and that looks like a good strategy right now.
