The Insider Report: Fight the Trend at Your Own Risk

Market Overview

Stocks broke out last week as anticipated, with technology leading the way. The strength of this signal cannot be discounted as we head into Fed rate cuts this year that are only going to boost the wind in the sails of the market's most important sector. Crypto looks to have found another floor as well, so be prepared for breakouts to continue left and right. In this type of environment, it's key not to fall into the FOMO trap. Stay focused on the setups, and keep booking gains as targets are hit.

Stocks I Like

Pegasystems (Ticker: PEGA) – 47% Return Potential

What's Happening

• Pegasystems Inc. (PEGA) is a leading software company specializing in business process management and customer engagement solutions, empowering organizations to streamline operations and enhance customer experiences, offering investors exposure to the rapidly growing enterprise software and digital transformation sector with a focus on automation and efficiency.
• The company's latest quarterly report showed revenue of $384.51 million and earnings of $50.15 million.
• This valuation on PEGA is a bit high. P/E is at 47.33, Price-to-Sales is at 6.42, and EV to EBITDA is at 28.85.
• From a technical standpoint, PEGA is coiling up nicely within an ascending triangle formation. This points to the current uptrend continuing higher in time.

Why It's Happening

• Pegasystems' strategic AI initiatives, especially its Pega GenAI Blueprint, are accelerating its transformation offerings by enabling faster digital application modernization. This innovation allows clients, like Vodafone, to reduce projects that typically span a year to just a few months, significantly enhancing client ROI and satisfaction. 
• The company has established strong partnerships with cloud giants AWS and Microsoft, expanding its market reach and credibility in delivering AI-driven enterprise software solutions at scale. These alliances not only facilitate deeper integration into clients' existing IT ecosystems but also enhance sales channels and co-selling opportunities, driving accelerated cloud adoption and revenue growth.
• Industry recognition cements Pegasystems' leadership position, with Forrester naming it a Leader in its Q3 2025 Digital Process Automation Platforms report, citing Pegasystems' highest scores in "current offering" and "strategy." Such accolades from respected analyst firms boost brand trust and influence enterprise purchasing decisions, contributing to sustained growth and premium valuation multiples.
• The strategic focus on expanding Pega Cloud subscriptions and increasing ACV is backed by upward revenue guidance, with the company now expecting 2025 revenues around $1.7 billion, above prior guidance. This trajectory of raising financial targets signals management's confidence in scaling sales and capturing market share, which typically precedes strong stock performance as earnings estimates climb.
• The company's Annual Contract Value (ACV) surged 16% year-over-year, with its Pega Cloud ACV soaring 28%, signaling robust subscription growth and recurring revenue streams.
• Pegasystems reported a strong Q2 2025 earnings beat with non-GAAP EPS of $0.28, surpassing the consensus estimate of $0.24 by nearly 17%. 
• Analyst Ratings:
  • Loop Capital: Buy
  • DA Davidson: Neutral
  • Citigroup: Buy

My Action Plan (47% Return Potential)

• I am bullish on PEGA above $49.00-$50.00. My upside target is $85.00-$90.00.

Hesai Group (Ticker: HSAI) – 40% Return Potential

What's Happening

• Hesai Group (HSAI) is a global leader in LiDAR technology, providing advanced 3D sensing solutions for autonomous vehicles, robotics, and industrial automation, offering investors exposure to the rapidly growing autonomous driving and smart technology sector with a focus on innovation and market leadership.
• In the last quarterly report, the company showed revenue of $706.39 million, but fell short on earnings.
• Valuation is very steep. P/E is at 254.21, Price-to-Sales is at 10.98, and EV to EBITDA is at 879.10.
• From a technical point of view, HSAI already broke out from a cup and handle formation. This points to upside momentum accelerating big time in the near-term.

Why It's Happening

• ​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​Hesai Group is launching a major Hong Kong IPO aiming to raise approximately $475 million, signaling strong investor confidence and providing substantial capital for expansion. This dual listing amid U.S.-China tensions diversifies its funding base and enhances global visibility, potentially increasing liquidity and attracting new investors to fuel growth.
• The company's lidar market share in the automotive segment stands at 33%, positioning it as a dominant player globally. Leadership in this fast-growing market, supported by expanding design wins with top OEMs and tier-1 suppliers, implies sustained revenue streams and competitive barriers protecting long-term growth potential.
• Hesai's next-gen lidar technology—highlighted at the IAA Mobility 2025 event—is setting industry benchmarks with its ETX model boasting the highest channel count, ultra-long-range, and superior resolution. Advanced products like ETX and FTX (solid-state lidar) cater to L3/L4 autonomous driving, strengthening Hesai's technological edge and opening new high-growth market segments.
• Hesai is preparing to expand manufacturing capacity into Europe to capture the rapidly growing regional market for lidar, reducing supply chain risks and localizing production. This strategic move facilitates faster delivery times and compliance with regional standards, enhancing competitive positioning and revenue diversification.
• Hesai’s robust presence in the robotaxi lidar market, serving key customers such as Cruise, Baidu Apollo Go, and DiDi, positions the company for substantial growth in autonomous mobility sectors beyond passenger vehicles. This diversification offers multiple revenue streams and reduces dependence on a single segment.
• Analyst Ratings:
  • UBS: Buy
  • Morgan Stanley: Overweight
  • Jeffries: Buy

My Action Plan (40% Return Potential)

• I am bullish on HSAI above $24.50-$25.00. My upside target is $40.00-$42.00.

uniQure (Ticker: QURE) – 70% Return Potential

What's Happening

• uniQure N.V. (QURE) is a leading gene therapy company developing transformative treatments for rare and severe genetic diseases, offering investors exposure to the rapidly growing biotechnology sector with a focus on innovative therapies for conditions like Huntington's disease and hemophilia.
• The company's last quarterly report showed revenue at $4.53 million and a loss of $32.46 million.
• Valuation in QURE is very high. Price-to-Sales is at 62.81, and the Book Value is actually negative at -0.07.
• From a charting standpoint, QURE has consolidated nicely within a cup and handle. Look out above if and when it clears resistance.

My Action Plan (100% Return Potential)

• I am bullish on QURE above $14.50-$15.00. My upside target is $28.00-$29.00.

Market-Moving Catalysts for the Week Ahead

How Did All Those Jobs Disappear?

Last week's inflation data all but confirmed this week's rate cut. I don't think we're going to see a 50-basis point cut, but instead, it will just be a 25-basis point cut, and then we'll just see the Fed continue doing so into the subsequent meetings.

However, what concerned me more is the payroll revision which basically eliminated around 900,000 jobs from the economy. How did the Bureau of Labor Statistics get this so wrong? This is well beyond the margin of error.

It also adds additional context to the feud between the White House and the Eccles Building. How is the Fed supposed to make correct decisions on monetary policy when the data they are using is flawed? This is a big problem, and now they are behind the curve on rate cuts.

Are We Heading into a Full-Blown Mania?

The number of naysayers around this bull market is truly music to my ears. We are very far from euphoria in this tape, and as the saying goes, "Sentiment follows price, not the other way around."

Here we are with stocks at all-time highs, and we are far from greed and seeing a significant amount of bearishness amongst market participants. If anything, this provides further fodder for stocks to continue higher.

That said, don't be surprised if a bit of chop creeps back into the tape this week with the Fed's rate cuts. It could be a "buy the rumor, sell the news" event, but if anything, it would provide another dip opportunity to buy. As we've been saying, don't hesitate at the dips.

Sector & Industry Strength

If you read this update on a weekly basis, you're exposed to the inner workings of how the sector components of the S&P 500 drive the performance in the index. I've been pounding the table on how the right sectors continue to both lead and lag.

Technology (XLK) continues to lead the charge higher out of the April 7 low, which is typical of a new bull market. Plus, we have communications (XLC) and consumer discretionary (XLY) in second and third place, which is just as bullish.

At the bottom of the pack, we have healthcare (XLV) and consumer staples (XLP) at the bottom of the pack. These are the type of sectors we like to see lag. Plus, there's utilities (XLU), which has also fallen asleep. This is good for bulls.

Editor's Note: All Growth – Total Domination by Bulls.

An Update on the Classic Risk Indicator (Sector ETF: SPY/TLT) 

With the latest drop in long-term rates, and a Fed rate cut coming this week, it's a great time to check in on the market's most classic indicator for risk – the ratio between the S&P 500 (SPY) and long-term Treasuries (TLT).

The ratio can be interpreted along the following – when SPY outperforms (and the ratio rises), the market is in risk-on mode. But when TLT outperforms (and the ratio falls) the market is in risk-off mode.

Clearly, we've been in risk-on mode and the ratio has confirmed this with its own uptrend by forming higher-highs and higher-lows. But with the recent bid we've seen in bonds lately, keep a close watch on this to see if risk starts creeping back into the picture.

The Next Leg Higher is Near (Sector ETF: XLK/SPY) 

This may be the most important ratio in the market right now, and quite frankly, many are not ready for the tech sector (XLK) to resume leadership and carry stocks onto new all-time highs. I like to compare it against the S&P 500 (SPY) for reference.

Remember that tech makes up around 30% of the S&P 500 – this market lives and dies by that sector. So if we're about to see a continuation of this uptrend that's been consolidating for a year and a half, it bodes well for the overall market.

The duration of the broadening wedge formation implies that a big move is coming for this ratio. A breakout in tech would reignite the AI trade and many other sectors in its periphery. This can take us into a blowoff market into year-end.

Spreads Are Narrowing Rapidly (Sector ETF: LQD/IEI) 

It's a great time to check in on the ratio between investment-grade corporate debt (LQD) and 3-7 Year Treasuries (IEI). We're about to start another rate cutting cycle this week, and the bond market is indeed confirming that liquidity conditions are improving.

When we see this ratio climbing higher, and LQD outperforming IEI, it means that liquidity conditions are improving significantly, and the odds of a market crash are dwindling. It would be in our best interest to pay very close attention to this.

Plus, we have the rounding bottom formation on this chart that we've been tracking for a couple of years now. If it clears the upper horizontal trendline acting as resistance, looking for the stock market to absolutely boom.

My Take:

The Fed and Treasury, although seemingly in a verbal war, seem to be on the verge of working together to try and pull off an economic miracle. However, the issue is time. The tactic they're about to use may not be viable forever.

They're going to try and run the economy, and by extension, inflation, above what they set interest rates are. It's going to create a tremendous amount of pressure in the bond market, until it eventually cracks.

Cryptocurrency 

The situation in Ethereum remains critical. It continues to consolidation sideways near its all-time highs, which is nothing short of bullish price action. Plus, we're about to enter another wave of market liquidity with the Fed set to cut rates this week.

It's trying to breakout from the symmetrical triangle formation, which is a continuation pattern. The trend is very clearly upward in this case, as seen by the series of higher-highs and higher-lows.

The first upside target is still in the 5600-5800 zone. Bigger picture, I'm still looking at a rally up to 7000-8000. As long as it holds above support in the 4000-4200 zone, there's no reason to be bearish on Ethereum.

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