The Insider Report: It's Tech's Market – We're Just Living in It

Market Overview

The bulls made it known that they were in charge this week. We saw new all-time highs in both the Nasdaq and S&P 500, which led the rally higher, finishing up 4.25% and 3.44%, respectively. The Dow Jones Industrial Average was up 3.82%, but is still well off its all-time high. The big story, however, is tech's rabid outperformance. As long as this stays the course, I'm fine with putting trade and geopolitical headlines in the backseat. Not to mention, Fed Chair Powell reopened the door for rate cuts later this year.

Stocks I Like

Oscar Health OSCR – 56% Return Potential

What's Happening

• Oscar Health, Inc. (OSCR) is a technology-driven health insurance company focused on providing affordable, accessible, and user-friendly healthcare plans, leveraging data and digital platforms to enhance member experiences and manage healthcare costs.
• The company has been making strides in the right direction. Both revenue and earnings are growing, as the latest report showed quarterly revenue at $3.05 billion and earnings at $275.27 million.
• This valuation on OSCR is steep. P/E is at 51.1, Price-to-Sales is better at 0.55, and Book Value is at 5.23.
• From a technical perspective, OSCR is retesting former-resistance-turned-support of the saucer formation. If it holds, look for the uptrend to continue.

Why It's Happening

• CEO Mark Bertolini's bullish commentary and strategic vision reinforce confidence in Oscar's trajectory, with management emphasizing superior value delivery and operational excellence. Leadership conviction, especially when backed by strong financials, can be a powerful driver of investor sentiment and stock price appreciation.
• Oscar reaffirmed its full-year 2025 guidance, signaling management's confidence in continued growth and margin expansion. Reaffirming guidance after a strong quarter is a bullish signal, indicating that the company expects its momentum to persist.
• ​​Oscar's medical loss ratio remained stable at 75.4%, despite a $31 million unfavorable prior-period adjustment, demonstrating effective risk management. Maintaining a competitive MLR is vital for health insurers, as it reflects the proportion of premium revenues spent on claims.
• Free cash flow exceeded $1 billion, underscoring Oscar's ability to generate substantial internal capital for reinvestment and shareholder returns. High free cash flow not only supports organic growth initiatives but also opens the door for potential dividends or buybacks, both of which can drive stock appreciation and appeal to a broader investor base.
• Oscar Health delivered blockbuster Q1 2025 results, with revenue soaring 42% year-over-year to $3.0 billion, outpacing most industry peers. This remarkable growth is largely attributed to a surge in membership across its core markets, demonstrating Oscar’s ability to attract and retain customers in a fiercely competitive landscape.
• ​​Net income jumped to $275.3 million in Q1 2025, up from $177.4 million a year ago, highlighting significant bottom-line improvement. 
• Analyst Ratings:
• Piper Sandler: Overweight
• Wells Fargo: Equal-Weight
• UBS: Neutral

My Action Plan (56% Return Potential)

• I am bullish on OSCR above $17.00-$17.50. My upside target is $32.00-$33.00.

Lemonade LMND – 54% Return Potential

What's Happening

• Lemonade, Inc. (LMND) is a technology-driven insurance company that leverages artificial intelligence and data analytics to offer renters, homeowners, car, pet, and life insurance, focusing on streamlined digital experiences and efficient claims processing.
• Business results are mixed. Revenue is growing but there are still some earnings issues. The latest report showed revenue of $151.2 million but a loss of $62.4 million.
• Valuation in LMND is steep. Price-to-Sales is 5.88 and Book Value is 7.45.
• At a technical level, LMND broke out from a saucer not long ago and has seen an acceleration of momentum to the upside. This looks poised to continue.

Why It's Happening

• ​​​​​​​​​​​​​​​​​​​​​​​​Lemonade's recent collaborations, including work with OpenAI to enhance its RealTime API and voice agent platform, underscore the company's commitment to leveraging cutting-edge technology. These partnerships not only improve operational efficiency and customer experience but also differentiate Lemonade from legacy insurers. 
• Despite a $22 million hit from California wildfires, Lemonade's risk management and reinsurance strategies allowed it to absorb the loss and still meet financial guidance. This real-world stress test proved the robustness of Lemonade's business model and its ability to protect both customers and shareholders from outsized catastrophe risk
• The company's car insurance line is gaining momentum, with growth in Q1 2025 outpacing the rest of Lemonade's product portfolio. This is significant because auto insurance is a massive addressable market, and Lemonade's entry is still in its early stages.
• Lemonade surpassed 2.5 million customers in Q1 2025, marking a 21% increase from the previous year. This milestone reflects both strong acquisition and improved retention, driven by a seamless digital experience and innovative product offerings. As Lemonade's customer base expands, the company benefits from greater data insights, enhancing its underwriting precision and fueling a virtuous cycle of growth and profitability.
• Lemonade just reported its sixth straight quarter of accelerating growth, with in-force premium (IFP) reaching $1.008 billion—a 27% year-over-year increase. This level of consistent growth at scale is a testament to the effectiveness of Lemonade's AI-driven business model and its ability to win market share in a competitive insurance landscape.
• The company's revenue climbed 27% year-over-year in Q1 2025, matching its IFP growth and demonstrating that Lemonade is not just adding customers but also successfully monetizing them.
• Analyst Ratings:
  • Piper Sandler: Neutral
  • JMP Securities: Market Outperform

My Action Plan (54% Return Potential)

• I am bullish on LMND above $38.00-$39.00. My upside target is $65.00-$70.00.

Reddit RDDT – 33% Return Potential

What's Happening

• Reddit, Inc. (RDDT) is a social media platform that operates a network of communities where users share, discuss, and vote on content, leveraging user-generated posts and advertising for revenue
• This company generally positive business performance. The most recent quarterly report showed revenue at $392.36 million and earnings at $26.16 million.
• Valuation is steep in RDDT is high even for a tech stock. P/E is at 26.88, Price-to-Sales is steep at 16.49, and EV to EBITDA is a whopping 471.12.
• From a charting standpoint, RDDT just broke out from a saucer pattern. The gap and go is especially a strong sign that bulls have turned the tide on this stock.

Why It's Happening

• As the go-to destination for authentic, community-driven conversations, Reddit has carved out a unique niche that is difficult for competitors to replicate. This differentiation underpins user loyalty and makes the platform especially attractive for brands seeking genuine engagement rather than passive impressions, supporting premium ad pricing.
• The company is leveraging AI to expand its post translation feature into over 35 new countries, including major markets like Brazil, Germany, and Italy. This strategic move opens up vast new audiences and advertising markets, positioning Reddit for accelerated international growth and diversified revenue streams.
• Reddit's gross margin expanded to an impressive 90.5% in the latest quarter, underscoring the platform's highly scalable and asset-light business model. Such high margins are typical of dominant digital platforms and provide ample room for operating leverage as revenues scale. This margin profile positions Reddit to generate substantial free cash flow as it continues to grow.
• Daily Active Uniques (DAUq) jumped 31% year-over-year to 108.1 million in Q1 2025, showing that Reddit's platform is capturing ever more attention and engagement. This surge in active users not only boosts ad inventory and data value but also increases the network effect, making Reddit more indispensable to both users and advertisers. 
• Reddit's Q1 2025 revenue soared 61% year-over-year to $392.4 million, demonstrating that the company is rapidly scaling its monetization engine.
• Reddit reported net income of $26.2 million and diluted EPS of $0.13 in Q1 2025, handily beating analyst expectations
• Analyst Ratings:
  • Guggenheim: Buy
  • Loop Capital: Buy
  • RBC Capital: Sector Perform

My Action Plan (33% Return Potential)

I am bullish on RDDT above $120.00-$122.00. My upside target is $190.00-$195.00.

Market-Moving Catalysts for the Week Ahead

Jerome Powell's Subtle Pivot

Fed Chair Powell testified before Congress last week, and quietly dropped some very important lines about the central bank's next move. He's still holding onto dear life about the delusion of tariffs being inflationary, but he did signal rate cuts were on the table.

To paraphrase, the Fed Chair if trade deals get struck and tariffs get reduced or eliminated, the Fed would have cause to cut rates. I don't think this is a take that reinforces the idea that the Fed is "independent," especially with inflation at multi-year lows too.

Semantics aside, it does seem like rate cuts are coming, and most likely, it's going to be in September. Believe it or not, we could see the next serious round of market volatility by then. I think the best window for them to have cut rates was in the first half of this year.

Buy the Rumor, Sell the News

The fog of war was very dense over the past couple of weeks. We're being told that a ceasefire deal is in effect now between Israel and Iran, and while there may be some reasons to be skeptical, I think the price of crude oil confirms this conflict has a lid on it for now.

If anything, the market's reaction to this event was a classical reminder of the, "Buy the rumor, sell the news," market adage. There is real wisdom in these words, especially because we must understand that every market participant is acting based on their insights.

This causes price to be the ultimate indicator. Everything else is noise. I'm also a fan about having a specific time of the day to trade, instead of just randomly throughout the session whenever a hunch comes up. This reduces the time where you could make a mistake. In trading, it's not always about what to do, but what NOT to do.

Sector & Industry Strength

I cannot stress enough how much more bullish the market's internals became this past week. If anything, this signals that we are still very early in this new bull market, and that upside should be plentiful in the next twelve months.

I'm looking directly at technology (XLK), which surged several spots and into third place in terms of year-to-date performance. This is exactly what bulls needed to see, along with the sharp drop in utilities (XLU).

We now have nothing but risk-on sectors in industrials (XLI), communications (XLC), and technology (XLK) as the top-three performing sectors year-to-date. Seeing healthcare (XLV) at the bottom, along with the sharp drop in energy (XLE) is a good sign too.

Editor's Note: It's tech's market and we're just trading in it.

Tech is on the Move (Sector ETF: XLK/SPY) 

When it comes to the U.S. market, we live and die by tech. This is both a blessing and a curse. It's a blessing because there's no better sector to make money, but it's a curse because if tech isn't rallying, the overall market usually suffers.

Note how the ratio between tech (XLK) and the S&P 500 (SPY) peaked back in July 2024. This was a warning sign that the rally was on uneasy footing coming into 2025. Then the ratio really blew up into the April 2025 low.

But now it's surged back higher, and it looks like we have a broadening wedge formation on this chart. This is a very bullish development as it signals we are still early in tech's outperformance against the index. As long as this keeps rising, look for stocks to continue higher.

Chips Outrunning Software (Sector ETF: SMH/IGV) 

Now that we've established tech's dominance within the overall market, the next step is to look at some sub-sectors within the tech space. There are a lot of things moving, so our job is to find the best opportunities.

It looks like that sector is semiconductors, which have been on an absolute tear since the April low. If we take a look at how chips (SMH) are performing against software (IGV), we see a new major trend in the making.

Chips had a rough go in the back-half of 2024, especially against software. Interestingly, software was terrible too, but the fact that this ratio dropped into April highlights the bloodbath in chips. Now that it's turned higher and broken out of the wedge formation, the best opportunity in tech looks to be in the semiconductor space.

Liquidity Conditions Stable (Sector ETF: LQD/IEI) 

It's interesting how Fed Chair Powell testified before Congress last week and basically left the door open for rate cuts later this year. He's still delusional about tariffs and inflation, but that's a conversation for another time.

I really care about liquidity levels in the market, and I think that's going to be taken to the next level here shortly. The trend in the ratio between investment-grade corporate debt (LQD) and 3-7 Year Treasuries (IEI) is starting to turn up, which is a very good sign for the market.

Let's put it this way – if this ratio is dropping, there's little-to-no chance that we see a significant stock market drop. That only happens when liquidity dries up, and when people go to sell, there's no real buyers.

My Take:

I've been watching this saucer formation for a long-term here in this ratio between LQD and IEI. The biggest thing near-term is the fact that the ratio completed a significant higher-low back in April. This helps the longer-term trend, which hasn't been very clean over the past year.

We know the Fed watches credit spreads very carefully. Once rate cuts start up again, I would look for this ratio to start climbing again. In other words, non-Treasury bonds are likely to rally more than Treasuries, which is good for the overall market.

Cryptocurrency 

Bitcoin’s continues to consolidate above the critical $100,000-$105,00 support level that previously served as major resistance throughout early 2025. As long as prices remain above this zone, there's no reason to be bearish.

Remember the saying, "The bigger the base, the higher the space." Prices have been building this wedge formation for over 6 months now, so the ensuing move should be massive. At the very least, we're looking for it to go above 130,000-135,000.

The trend has been undoubtedly higher since April, although the past few weeks have seen some choppy action and even a series of lower-lows and lower-highs. Still, it's not enough to warrant being bearish on Bitcoin at this point.

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