Ride the electric vehicle wave to 2021 with Kensington Capital Stock
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This year will go down in history because of what Covid-19 has done to humanity. We will also remember how we shut down the world for months. But on Wall Street, they will tell how 2020 was the year of the SPACs (Special Acquisitions Corporations). Kensington Capital Acquisition Corp. (NYSE:KCAC) is the one that was revealed in mid-August. But on September 3, Kensington’s share capital soared nearly 100% in a flash. The company’s goal was to blaze a trail in the electric vehicle revolution.
The jubilation continued for another day as KCAC set another record and extended the gains to 150%. Alas, it marked the summit and since then it was descending quickly. So far it has fallen 44%, but it is still 30% above the September 3 breakout line. This is a major setback for bulls, especially those who chased the hype too late.
How to redeem it from here requires some speculation about the future of electric vehicles and some technical mapping skills.
The spike in Kensington Capital shares
The reason Kensington’s share capital skyrocketed was news of its merger with QuantumScape. QuantumScape specializes in the battery revolution. This will fill a great need for electric vehicles coming to market.
The new union has the support of powerful names like Bill Gates and volkswagen (OTCMKTS:VWAGY). Given the recent Nicholas (NASDAQ:NKLA) shenanigans, it is extremely important to verify them. Justin Mirro, founder and CEO of KCAC, has the automotive credentials to lead this thing.
Not all electric vehicle jump starts will be successful, but those that are will need batteries. KCAC will have the opportunity to serve this emerging industry. While You’re here (NASDAQ:TSLA) created the best challenge against the internal combustion engine (ICE), the effort is still in its infancy.
In 2019, the world produced over 90 million vehicles. This year it will be less due to the pandemic hiatus. Still, that’s a ton of potential as EVs make up just 3% of total vehicle sales. There are a lot of bargains to grab. The KCAC has a long track ahead of it provided it keeps its promises. The science of QuantumScape will be the ace up their sleeve.
Graphics will matter
I don’t claim to be an expert on this, but browsing the top line suggests potential. Owning Kensington Capital shares is a pure bet on the future success of this new alliance. It is therefore by definition a speculative trade so it cannot be massive.
I don’t have an advantage in the knowledge base, but I can give myself an advantage from the graphs. This is where a bit of technical analysis can be very helpful. Conviction is rare when betting on hopium. Learning a few lines on a chart can help with this.
After falling 47%, KCAC stock found footing at $13.50. This now becomes the line to remember, otherwise the chute continues to fill the gap. Conversely, rallies to $17 per share will be met with resistance. The selling pressure will start around $16. In fact, each ledge on the way down is now a resistance on the way up. The mega-spike caused a lot of damage as it broke the normal price patterns that machines like to follow.
From there, the bet remains the same as before and it is binary. Investors who like the concept should just buy it for the long-term reward. If Kensington is indeed one of the suppliers to the electric vehicle industry, they will have a big reward. The potential addressable market is so huge that there will be deals for everyone.
Tesla succeeds and others will too. KCAC is following this trend as it is already in bed with VW, the biggest automaker on the planet. It’s a good position to have and he’ll gladly do his part in the EV fight against ICE.
At the date of publication, Nicolas Chahine did not hold (neither directly nor indirectly) any position in the securities mentioned in this article.
Nicolas Chahine is the Managing Director of SellSpreads.com.
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