This High Risk / High Reward Stock Broke Out with High Volume

We recently started a series called “Penny Stock of the Day”. These ideas are geared for traders with an extremely high risk appetite.

Our Penny Stock of the Day is chosen by screening for stocks under $5 and then applying technical analysis on the shortlisted set of penny stocks showing unusual volume. When making these trades, please make sure to pay vigilant attention to pricing moves and have a strict stop loss in place to avoid significant losses.

Penny Stock of the Day: Senseonics Holdings Inc. (NYSE: SENS)

Today’s penny stock pick is the medical technology company, Senseonics Holdings Inc. (NYSE: SENS).

Senseonics Holdings Inc. develops and commercializes continuous glucose monitoring (CGM) systems for people with diabetes in the United States, Europe, the Middle East, and Africa.

The company’s products include Eversense and Eversense XL, which are implantable CGM systems to measure glucose levels in people with diabetes through an under-the-skin sensor, a removable and rechargeable smart transmitter, and a convenient app for real-time diabetes monitoring and management for a period of up to 90 and 180 days.

It serves healthcare providers and patients through a network of distributors and strategic fulfillment partners. The company has a collaboration agreement with the University Hospitals Accountable Care Organization.

Website:  www.senseonics.com

Latest 10-k report:  https://sec.report/Document/0001558370-21-002458

Analyst Consensus: Based on 5 Wall Street analysts offering 12-month price targets for SENS in the last 3 months, the stock has an average price target of $4.13 and an average rating of ‘Moderate Buy’.

Potential Catalysts / Reasons for the Hype:

• The upcoming earnings release, which is on November 9, 2021.
• The potential of an FDA approval for SENS 180-day sensor. It is rumored that if FDA approval happens, SENS’s price could reach triple digits in three to five years.

On analyzing the company’s stock charts, there seem to be multiple bullish indications…

Bullish Indications

#1 Symmetrical Triangle Pattern Breakout: The daily chart shows that the stock has currently broken out of a Symmetrical Triangle pattern with high volume. A symmetrical triangle is a continuation pattern and is characterized by two converging trendlines connecting a series of sequential peaks and troughs. This is marked on the daily chart as purple color lines. Once a stock breaks out from a symmetrical triangle pattern, it usually moves higher.

#2 Price Above MAs: The stock is currently trading above its 50-day as well as 200-day SMA. This is a possible bullish indication.

#3 Bullish ADX and DI: The ADX indicator shows bullishness as the +DI line and the ADX line are above the -DI line, and the ADX line has started to move higher from below the +DI and -DI lines.

#4 MACD above Signal Line: In the daily chart, the MACD (light blue color) is currently above the MACD signal line (orange color). This indicates a possible bullish setup.

#5 Bullish Aroon: The value of Aroon Up (orange line) is above 70 while Aroon Down (blue line) is below 30. This indicates bullishness.

#6 New Uptrend: The weekly chart shows that the stock has currently started a new uptrend. The uptrend line has been marked in pink color. This is a possible bullish indication.

#7 Bullish Stoch: The %K line is above the %D line of the stochastic in the weekly chart, and is also moving higher from oversold levels. All these indicate possible bullishness.

#8 Bullish RSI: The weekly chart shows that the RSI is currently above 50 and moving higher. This indicates the strength of the current upmove.

Recommended Trade (based on the charts)

Buy Levels: If you want to get in on this trade, the ideal buy level for SENS is above the price of $4.05.

Target Prices: Our first target is $5.00. If it closes above that level, the second target price is $7.00.

Stop Loss: To limit risk, place a stop loss below $3.50. Note that the stop loss is on a closing basis.

Our target potential upside is 23% to 73%.

For a risk of $0.55, our first target reward is $0.95, and the second target reward is $2.95. This is a nearly 1:2 and 1:5 risk-reward trade.

In other words, this trade offers 2x to 5x more potential upside than downside.

Potential Risks / Red Flags:

1. SENS has incurred significant net losses since its inception, including net losses of $175.2 million, $115.5 million, and $94.0 million for the years ended December 31, 2020, 2019, and 2018, respectively.
   

   SENS – Consolidated Statements of Operations and Comprehensive Loss

2. The company has ongoing legal proceedings. In February 2021, SENS received a notice and accepted service of a civil complaint that was filed in the Western District of Texas and styled Carew ex rel. United States v. Senseonics, Inc., No. SA20CA0657DAE. The complaint alleges the Company’s marketing practices with physicians for its product, Eversense Continuous Glucose Monitoring System, violated the False Claims Act, 31 U.S.C. § 3729 and the Texas Medicaid Fraud Prevention Law, Tex. Hum Res. Code § 36.002.
3. Despite reporting increasing losses year-over-year, the company executives are being paid significant compensation.
   

   SENS – Executive Compensation

4. The company’s implantable continuous glucose monitoring (CGM) device franchise known as Eversense has stiff competition in the U.S. from the market-leading devices from DexCom and Abbott Laboratories.
5. The company has a negative insider confidence signal. Corporate Insiders had sold shares worth $1.2 million in the last 3 months.
   

   Insider Sentiment | Source: TipRanks.com

As you can see, today’s featured penny stock offers big upside potential… but it also comes with a number of risks and red flags. As always, when dealing with penny stocks, we advise caution before entering into such high-risk ventures. Remember to think before you trade… understand the risks… and if you decide to trade, stick to your stop-losses!

Happy Trading!

— Trades of the Day Research Team

READ BEFORE TRADING PENNY STOCKS: The allure of penny stocks lies in their potential to deliver massive gains in a short period of time. However, in exchange for that opportunity, most penny stocks carry tremendous risk. They can be extremely volatile and are susceptible to “pump and dump” schemes and fraud.

Unlike regular stocks, the financial condition of most penny stock companies can be extremely difficult to analyze, as the majority of such stocks are traded on over-the-counter (OTC) exchanges, which are typically less transparent and less regulated than the major exchanges. In fact, in the penny stock space, it’s often easier to spot warning signs and red flags than it is to identify a sound investment. Nevertheless, we do our best to identify short-term trade opportunities in this exciting space because we know some of our readers are looking for high-risk, high-reward ideas. We just urge you to make sure you fully understand the risks before making any of these trades.

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