Chart Advisor: The Best Setup in This Breakout Is a Stock Everyone Gave Up On

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The Best Setup in This Breakout Is a Stock Everyone Gave Up On

The best-looking insurance stock right now still loses money.

It also fell 70% from its high. That combination is supposed to end an argument, not start one, because a stock down that hard with no profit is exactly what most investors are trained to avoid. I think they have it backwards, and the story is why.

The stock is Lemonade, ticker LMND. It went public in 2020 as one of the hottest names on the market, an AI insurance disruptor that settled claims in minutes instead of days.

The hype ran wild. By early 2021 the stock had spiked to almost $183.

Then reality showed up. The stock lost roughly 70% of its value, the story went cold, and most investors moved on and never looked back. For years, LMND was a name people remembered getting burned by, not one they were watching.

Here is what they missed while they were not looking. The business quietly got good. First-quarter 2026 revenue grew 71%, the customer count topped 3 million, and management guided to positive adjusted earnings by the fourth quarter of this year.

One number tells the AI story better than the pitch ever did. The loss adjustment expense ratio is the slice of every premium dollar a company burns handling claims.

LMND runs near 6%, while traditional insurers run in the high single digits to low teens. That gap is the automation edge, and it is measurable, not a slide in a deck.

So the fundamentals turned. That alone does not make a stock worth buying, because a good business can stay a bad stock for years.

What changed my read is where the chart is now, and it starts with the whole group.

Insurance just broke out. The SPDR S&P Insurance ETF, ticker KIE, spent about a year and a half grinding sideways, then absorbed all that overhead supply and pushed to new highs. When a boring, ignored corner breaks out while the mega-cap names rest, that is a healthy bull market working beneath the surface.

Inside that breakout, LMND has the most compelling chart, and it turns on one tool worth learning: anchored VWAP. VWAP is the volume-weighted average price, the average price everyone paid over a stretch of time. Anchor it to a specific date and you track what every buyer since that date paid on average.

Anchor it to the all-time high and you are watching everyone who bought at the top. LMND reclaimed the price zone tied to that level, which says the longest-suffering holders are finally back in control. It also reclaimed the VWAP anchored to this year’s high, so the recent buyers are back above water too.

Two anchors, both reclaimed. After a multi-year base, that is the tell that a new uptrend may already be underway.

None of this makes it safe. Lemonade is still unprofitable, GAAP earnings are not expected until 2027, and it carries catastrophe risk, heavy auto-insurance competition, and shareholder dilution. This is a higher-volatility bet, not a stable compounder.

So here is the line that ends the story. If LMND loses the VWAP anchored to this year’s high, the buyers lost control and the setup is dead. Until then, the base is built, the group is breaking out, and the stock everyone left for dead is quietly acting alive again.

Lemonade is one rotation. It is money moving into a group most people wrote off, and the tape flagging it before the headlines caught up. That is the pattern worth training your eye on, because the biggest rotation happening right now is not in insurance at all.

It is in defense. The largest defense spending wave since 1947 is building, and the money is already moving into the groups that will absorb it. That is exactly what we are going live to break down this week.

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Originally posted 7th July 2026