For his second Executive Decision segment of last Friday's "Mad Money" program, host Jim Cramer spoke with Jagdeep Singh, chairman and CEO of QuantumScape Corp. (QS) , a solid-state battery maker that has come under fire from a research firm, Scorpion Capital, which characterized the company as a "pump-and-dump" scam.
QuantumScape immediately responded to Scorpion's allegations, answering its concerns at length.
Singh said QuantumScape always has been very transparent about what it has and the work that still remains to be done. He said while QuantumScape has solved some of the primary issues that have held back solid-state batteries thus far, it only has been able to produce single-layer and four-layer cells. It must continue to work to produce cells with dozens of layers.
Singh cited Volkswagen's VLKAY recent $100 million investment as proof that his company is for real. He said the investment with VW required QuantumScape's cells to pass certain milestones and it recently sent cells to Germany that passed those milestones.
We looked at the charts of QS back on Feb. 24 and wrote, "I don't know the fundamentals and I do not have a lot of price history to recommend this stock. Maybe the worst is behind us, but the Point and Figure chart suggests we could decline to the $31 area."
Let's check out the charts again.
In this updated daily bar chart of QS, below, we can see that prices have weakened to a new low for the move down from our Feb. 24 review. The slopes of the 20-day and 50-day moving averages are negative. The daily On-Balance-Volume (OBV) line is pointed down, telling us that sellers of QS are more aggressive. The Moving Average Convergence Divergence (MACD) oscillator is in a bearish alignment below the zero line.
In this daily Point and Figure chart of QS, below, we can see a revived $33 price target.
In this weekly Point and Figure chart of QS, below, we can see a potential longer-term price target of just $5. A rally to $52 is needed to turn the picture positive, in my opinion.
Bottom line strategy: QS is oversold so we could have a bounce unfold at any time, but these charts (above) are pointed down and the odds favor further declines. Avoid the long side.