A lot has happened on Wall Street in the past two years. The pandemic on Main Street changed how we invest in stocks. Two major memes blossomed into exciting opportunities, combining to create the opportunity for QuantumScape’s (NYSE:QS) stock.

The electric vehicle charge against the internal combustion engine is a real thing now. And the commitment to ESG investing became more prevalent. The goal of QuantumScape, meanwhile, is to improve batteries for the EV application.

QS Stock Takes a Tumble

As exciting as it sounds, the price action has been horrendous. After spiking to $132 per share last December, it crashed and lost 83% of its value. The slide has been consistent and gradual but after initial massive jolts.

When a company stock tumbles into a prior support zone I usually like to catch the proverbial falling knife. Not in this case, because the outcome of its future is binary. They are trying to accomplish something that is very hard to do.

The solid state battery concept is viable but not likely in an EV setting. Cars are just too big and the load too large for a practical application of the tech. Experts contend that it will work fine in the lab but not in everyday life. Therefore my conclusion today is to remain cautious regardless of distance to all time high.

Trying to Build Momentum

There are no sure things in this venture.

Management will either succeed or fail, that’s the meaning of binary. By definition the trade earns the speculative tag. If I own shares, I would not be adding to them. Averaging down in an iffy proposition could lead to painful wipe outs. New speculators who want to bet on its success should keep risk relatively small.

Every portfolio needs a little bit of speculation, as long as it is not large enough and can cause damage.

QS stock popped on earnings inside this painful descending channel. The rally will find resistance going into $25, however, hurdles can become triggers. Then the process will repeat at $28 and $31 per share.

The recovery for QS will not be easy if it ever happens. It is important for the bulls to maintain a higher-low trend alive. Meaning, if they fail to hold $21 per share then the sellers remain in charge. This price action is the exact opposite of what’s going on in the stock market.

Watch for a Trap Door

Investors should accept the possibility of total loss. It’s OK to gamble every once in awhile, but it’s not OK to desperately need it to work out. The stock also rallied a bit after the previous earnings report and then it gave it back and then some. Cautious optimism is good, blind belief is bad.

I’ve debated this ticker with a lot of traders and the fans have too much conviction. Even though I am not an expert on battery technologies, I know my way around the subject. I am an electrical engineer first, and this just doesn’t sound feasible. I warned about this months ago and the market has agreed so far.

If we compare the S&P 500 chart to this one, we find extrinsic risks. The indices dips have been buying opportunities to the nth degree.

QS stock, on the other hand, is doing the exact opposite, and setting lower-lows and lower-highs.

There is no sign of a bottom yet, so I shouldn’t jump the gun and expect one. What looks like a bottom now may turn out to be a trap door to single digits. I don’t mean to insult the opportunity in it. My goal is to highlight the fact that it is binary and that failure is an option.

On the date of publication, Nicolas Chahine did not have (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.

Nicolas Chahine is the managing director of SellSpreads.com.