QuantumScape Stock Falls After Pump-And-Dump Accusations: A Technical Analysis

QuantumScape Corporation QS hit an all-time high of $132.73 Dec. 22, 2020 and has plummeted 73% since then. 

To make matters worse, on Thursday the research company Scorpion Capital released a report calling QuantumScape “a Pump and Dump SPAC Scam By Silicon Valley Celebrities, That Makes Theranos Look Like Amateurs.”

Over the course of Thursday and Friday, shares of QuantumScape, an electric vehicle battery research company, fell another 14.5%.

On CNBC's "Mad Money," Friday host Jim Cramer will be discussing the report with QuantumScape CEO Jagdeep Singh.

Traders and investors will want to watch closely to see Singh’s response. But what does the chart say?

The QuantumScape Chart: News of the short report forced QuantumScape to drop under its support level at $40.62. It had tested this support a number of times over the last three months and held.

On Friday, QuantumScape’s stock failed to regain the level as support but created an inside bar with all of Friday’s price action happening within the range of Thursday’s price action.

QuantumScape is trading below both the eight-day exponential moving average and the 21-day EMA, which is bearish. It is also trading within an area where there is not a lot of previous price history, and because of this, there is no support below until $23.50.

A drop below that level of support would erase QuantumScape’s entire bull move that began in November.

Bulls want to see decreasing bear volume and for the price and EMAs to start to curl back up. Ideally, bulls would like the stock to regain the $40.62 support level, but that will now act as resistance. If QuantumScape can regain that level of support, it has room to move back above the eight-day and 21-day EMAs for a further move up to the $52.80 level.

Bears want to see a continued grind lower and for large bear volume to continue to drive the price down another 32% to QuantumScape’s next support level.

QS Price Action: Shares of QuantumScape ended Friday's session down 0.92% at $35.52.