Sientra (SIEN) Has More Room To Run

By Unknown Wednesday, January 6, 2016
Shares of Sientra (SIEN) suffered a disastrous 2015 after its Brazil-based contract manufacturer, Silimed, had its CE Mark for making medical devices suspended by the UK and Brazil, effectively pausing the sale of Sientra's products. In addition, the company completed an equity raise, and a fire roared through Silimed's main building where Sientra products are produced...tough break.

After being up more than 50% for the year in September, shares took a nose dive on the news and finished 2015 down 64%.

From peak to trough, Sientra lost nearly $400M in market capitalization in a mere two months.

Going into 2016, shares of Sientra look poised to go into rally mode and regain some lost ground.

Fundamentally, the company replaced its Chairman and CEO and is working with its supplier in Brazil to restart production of its products, and diversify its supplier base. Make no mistake, the production halt is temporary and will be resolved. New management can quickly right this ship. Impatient investors sold Sientra to the ground, but often, investor impatience creates opportunity for medium/long term investors. This seems to be the case for Sientra.

Technically, shares of Sientra are showing positive signs. The stock reclaimed its 50 day moving average and began a new uptrend, creating higher highs and higher lows. MACD has turned positive and RSI is in a strong uptrend.

Yesterday, the stock jumped more than 12% on an impressive surge in volume and on no news. There are two $2 gaps in Sientra's stock: At $21 - $23 made back in September, and $8 - $10 made back in October. While gaps do not necessarily have to be filled, they do act as support and resistance target levels. Sientra has formed a bullish inverted head and shoulders pattern in November, yielding a $7.25 measured move price target.

As the stock continues its uptrend, expect $10 to be a magnet, as well as strong resistance since there is already a ton of overhang for Sientra above $10 and as high as $25. A fall below the uptrend near $6 would signal a break down and result in weak price action, so for a swing position, set a stop loss at $6 and sell in the $8-$10 range. At current $6.73 share price, risking 10% for potential return of 18% - 48% represents an attractive risk/reward profile.

After rallying 142% from its November 2015 low, it looks like shares of Sientra may have more room to run going into 2016.

*I currently have no position in SIEN, but may initiate one in the future. 
The Wall Street Fox

The Wall Street Fox utilizes fundamental and technical analysis to generate investment ideas. TWSF holds a MBA, and is currently preparing for the Chartered Market Technician (CMT) designation.

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