Last week, special purpose acquisition company (SPAC) Kensington Capital Acquisition (KCAC) announced a business combination that will take QuantumScape public with a pro forma enterprise value of $3 billion. QS is backed by Bill Gates, Volkswagen and several other prominent investors. It is developing what are known as "solid state" batteries, which have a number of advantages such as longer life and faster charging. Volkswagen is prepared to commercialize the battery in the near future. More details can be found here.
This deal is likely to close in the fourth quarter and there is no immediate news catalyst. We are looking for the technical setup here to attract interest. SPACs often suffer through a flat period as they wait to close deals, but they can offer good entry points for patient investors.
KCAC exploded higher on news of the deal and has now pulled back to support around the $18 level. We are looking for a move back over the downtrend line to bring back the momentum traders that chased it higher when the deal was first announced. Clear support is at $18 and could be retested.