For many traders right now, it’s a meme stock. But when it comes to Senseonics (NASDAQ:SENS) and its long-term proposition for a much weightier group, it’s time other investors consider going long SENS stock. Let me explain.
SENS stock. It’s just what we need, right? Redditors muscling shares of a very modest small-cap with limited analyst coverage and decent short interest to ridiculous valuations. Then, and as quickly, watching the targeted stock tank like a diabetic sugar crash. Not really. But you can check that box off for Senseonics.
Earlier this year and amid the Reddit apes inaugural short-squeeze featuring GameStop (NYSE:GME) and AMC (NYSE:AMC), SENS went from an obscure $250 million healthcare technology outfit trading under a buck to a stock fetching north of $5.50 a share and flaunting a fairly hefty $1.69 billion small-cap valuation by mid-February.
The fun and gaming in SENS stock didn’t last, of course.
SENS Stock and the Market
Nearly three months after SENS peak valuation and marginal fresh all-time-high, shares traded as low as $1.62 for a bellyaching retracement of 71%. But similar to some of its peers within the Reddit industry group, there’s been a second act for SENS.
Today and several weeks after striking its relative low in early May, the apes have aggressively taken shares up to about $3.55. And less than two weeks ago, SENS reached as high as $4.58 before pulling back. Bananas, right? Nope.
Call it the law of large numbers. Amid Reddit’s field of suspect plays, once in a while the monkey business targets a company with significant prospects for other larger populations. And Senseonics looks like that kind of animal.
Don’t take my word for it. Take InvestorPlace’s Louis Navellier. Compared to today’s ape community in SENS, Louis is akin to an 800-pound gorilla given his tenured history of locating multibagger stocks before they make their big move. And today, Louis likes what he’s seeing in Senseonics.
It’s called a Continuous Glucose Monitor or CGM for short. Senseonics CGM is called the Eversense. Importantly, CGMs are an extremely beneficial technology for an ever-growing global Type II diabetic population.
The World Health Organization estimates 422 million globally are afflicted with the disease. And without passing judgment, CGMs make tedious and inconvenient needle pricking used to monitor glucose levels a thing of the past. What’s more and within this market, SENS’ Eversense CGM is shaping up as the best-in-breed.
The nuts and bolts of the Eversense are a subcutaneous sensor placed in the upper arm and a smart device worn over the sensor which monitors and transmits data to a mobile app. The net impact is the CGM can help people keep their blood sugar levels stable and avoid related and sometimes life-threatening diabetic spikes and crashes.
CGM and the Long View
In that respect SENS’ CGM isn’t unique. What’s different and exciting for both the diabetic population, as well as bullish investors with their eye on Eversense, is it’s longer-term application.
Most CGMs have a shelf life of up to maybe a couple weeks before having to be removed and replaced. That’s nearly as painful as constant needle pricking, right? But SENS’ CGM can remain in place for 90 days or three months. It’s a huge difference. What’s more, it’s one which could be ready for even larger advantage over the competition.
A study released earlier this month revealed the Eversense device is effective for up to half a year. There’s still regulatory approval before SENS’ device is cleared for that kind of use. But should it pass, it’s not tough to think it could be a real game changer for the company.
Coupled with a global diabetes treatment market poised for secular growth, Senseonics’ stands to do well. And then consider a solid cash position to put Eversense into the hands or umm, arms of an in-need population and an “A” rated stock by Louis’ strict search criteria – and SENS stock has the promise of being much bigger than today’s meme trade.
SENS Stock Monthly Price Chart
Source: Charts by TradingView
A recent monthly bullish crossover near overbought territory by the stochastics indicator suggests more momentum for SENS stock is possible. But this year’s February peak has established a slightly askew broadening or inverse triangle pattern. And it’s at odds with today’s bullish signal by the secondary indicator.
Typically, patterns of this kind continue to move from back-and-forth between support and resistance. In the case of SENS stock and given February’s peak near pattern resistance, the next logical price extension off those levels would be toward support. Mostly aligned with $0.00, that resolve would be disastrous.
Sometimes and quite powerfully though, patterns are prematurely broken. I’m optimistic that’s what’s occurring in SENS, with stochastics indicating higher and pattern-busting prices are in store for SENS stock.
Today and to avoid a less-pleasant outcome, stock investors might want to strongly consider exiting any long purchases if shares fall beneath the 50% pattern retracement level near $3.00. The broadening pattern would have a much more alarming, half-empty appearance were that to happen. And in turn, SENS could find itself trading as a penny stock once again and maybe permanently.
Alternatively, I’d suggest going with a longer-term collar spread due to its superior risk control, ability to profit handsomely and flexibility.
Given SENS stock short interest, the size of the price pattern and respecting bulls and bears typically make more money than pigs, the January $4/$8 collar is one favored combination which makes sense in our estimation.
On the date of publication, Chris Tyler 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.
Chris Tyler is a former floor-based, derivatives market maker on the American and Pacific exchanges. For additional market insights and related musings, follow Chris on Twitter @Options_CAT and StockTwits.