A simple summary of some recent trend understandings (turned out to be not so simple after writing it)

Here’s a brief update on recent trend ideas and observations. This is the opening sentence of my article. Currently, it’s the last sentence I write before posting, and I realize it’s not simple—five thousand words, eight pages. Take your time to read through. [Taogu Ba]
Too much text, so I won’t bother with bolding or formatting—just find the key points yourself~

First, I’ll share a few recent charts to help everyone recall the context.

1. The day before yesterday and yesterday, Changfei and Honghe both started showing signs of stagnation. I’ll keep this a secret for now—Changfei and Honghe are the leading stocks in this round of institutional trend rallies. Why? I’ll explain below. For now, let’s accept this conclusion and analyze further. After Changfei and Honghe began stagnating and lagging behind, conscious investors should notice a key issue: when the leading stocks of this style pause and consolidate, it indicates funds are gradually withdrawing and are unwilling to chase high prices. This is a high-low cut signal. If the leaders start to fall further, then there’s no high-low cut—it’s a liquidation and correction.

2. Fundamentally, the earnings of Changfei and Honghe have already been realized during the first wave of gains. The big drop on the first bearish candle of Changfei and Honghe’s earnings release was a fundamental realization. But afterward, their continued rise is driven by style and segmentation, with emotional and recognition premiums. Once this style ends, a correction will follow, similar to the sharp retracement in Changfei and Honghe’s recent K-line.

3. Trend stocks also involve initiative and leadership. The first to start and generate profit effects will be imitated. Those who proactively lead profit effects will also enjoy premiums. Initially, some saw Changfei as part of the Hangdian faction, but when Changfei ignored Hangdian’s negative feedback and moved independently, it confirmed it as the main leader of this style.

4. From a consecutive limit-up perspective, like Changfei’s initial surge and second buy point, the first big bullish candle is roughly equivalent to a weak-to-strong confirmation of leadership. Correspondingly, February 6th was an institutional node. I once shared a stock selection based on the 1.5 institutional node, which can also be applied to February 6th. So, stocks hitting the limit or surging on February 6th, especially institutional ones, should be considered as candidates for the next leader. Yesterday, I also shared stock picks at new highs on February 26th and proactive selections on February 27th—these are also signs of institutional awareness. If you realize that during February 26th and 27th you should be selecting institutional stocks for the upcoming period, you’re not far from understanding.

5. These charts reflect that even when the leading style stocks stagnate, there are still traders doing contrarian plays, with repeated fluctuations. Even in a fish tail market, recognizing stagnation should prompt you to look for high-low cuts to continue eating the “fish belly,” rather than panic-buying deep water longs on stocks like Changfei and Honghe.

6. Another foreshadowing is that today is also a phase where the market helps us select stocks. Under the pressure of institutional computing power trends, the initiative and leadership aspects become more evident. I shared many stock pool charts recently, and even made an Excel sheet for tracking.

However, there are many stocks and many directions.
But after today’s washout, it actually helps focus the attention—who’s swimming naked, who’s riding the wave, becomes very clear.
A big drop reveals the focus. This isn’t a knockout contest; it’s about selecting the strong. Similar to choosing breakout stocks based on momentum, divergence, and strength, you can still profit from macro and Huanchuang stocks later. But today, you can see which main players have more strength or a better pattern—it’s like a general negative feedback test to see who’s truly skilled and who’s just pretending.

Based on the rise and amplitude, the top active and long-legged stocks are four: Zhongtian, Hengtong, Dazhu, and Dongcai. Future institutional trends can revolve around these four for low buy and high sell. Among them, I subjectively see Zhongtian and Hengtong as high-low cuts of Changfei; Dazhu is solid; Dongcai is more recent, with rising K-line slopes, suitable for early entry.

7. The trend stock selection approach is similar to breakout stocks, with an extra step of finding profit effects. If you can’t analyze the fundamentals deeply, just follow the leaders’ initiation (like relay racing without leading). For example, when Changfei and Honghe show profit effects, others start to imitate. First, list potential directions and stocks, like the Excel I shared earlier, then gradually refine—filter by fundamentals, stock traits, and focus. Initially, I picked five or six directions with twenty stocks, tracked for a few days, and with today’s negative feedback, it became clear who’s strong. The final focus narrowed to Zhongtian, Dongcai, Hengtong, and Dazhu—just trade these.

The profit effect of Changfei, the pioneer in this round, was initially unnoticed—no one saw it coming. But after it emerged, you should analyze and realize that funds won’t easily abandon a hot style. When you discover Changfei, you should realize that the funds from Jin Haitong (another early leader) are likely flowing into Changfei. Later, you can see that the funds from Jin Haitong have moved into stocks like Zhongtian, Hengtong, Dazhu, and Dongcai. (The specific stocks may vary, but the idea remains the same: follow the style and flow of funds.)

I’ll stop here. Later, Jin Haitong started stagnating and slowly declined, just before the short-term top at Changfei’s big bullish candle. This can be understood as a short-term high-low cut, with the first big bullish candle marking the fund rotation point. This comparison shows that Changfei is the successor of Jin Haitong.

Similarly, the K-line comparison shows similar characteristics.

Back to the main topic: how to understand and trade trends, I’ve recently summarized a simple approach with a few key points:

1. Find the source of profit effects
2. Analyze the underlying logic and main trading strategies behind profit effects
3. Define the current profit effect with your understanding and language
4. Find imitators of the leader’s profit effect
5. Reason about the expansion of this profit effect
6. Preliminary screening of directions and targets
7. Divergence-based selection of strong stocks, based on style leadership feedback, doing high-low cuts
8. Identify stocks in the “fish belly” stage, up to five, for rolling gains

I’ll explain this in detail. The following is a transcript of a recent conversation I had, simplified and rough. Just take it as it is.
First, you need to identify where the profit effect is within a certain style. For example, in March-April last year, during Zhongyida’s period, the profit effect was still driven by price increases and trend snake moves. Recognize this style’s core—Zhongyida—and learn its pattern.
Then, find imitators, like Lianhua, Angli Kang, Yong’an Pharmaceutical, and Leshan Electric Power, which all ran multiple waves.

Once you identify the core stocks of the big cycle, you can find their imitators and those who break out and amplify the profit effect—those who develop their own recognition.
For example, after Zhongyida, there was Hongbaoli, then Yong’an Pharmaceutical, Lianhua, and Angli Kang—these became recognizable because they built on Zhongyida’s foundation and developed their own features.

Apply this to July-August last year, during the institutional computing power boom. The pioneer was Chunzhi, and its profit effect was imitated by Demingli. Demingli led the storage chip rally, but it was essentially a replication of Chunzhi’s approach. Later analysis suggests it was a group effort.

During the storage chip period, Demingli was just copying Chunzhi, with no new breakthroughs, so its strength declined over time. When the fundamentals and style were fully realized, the market was left with disappointment.

In this cycle, the core was Changfei and Honghe—these were the stocks leading the institutional hardware price increase. Jin Haitong first established this profit style, then Changfei and Honghe followed. Honghe started earlier but became more independent, no longer relying on Hangdian’s influence, and became the main style leader.

Once you understand the model of Changfei and Honghe, you should seek to imitate their approach. Their underlying logic is advanced technology iteration gaining market share—Honghe in high-end electronics, Changfei in high-end optical fibers—both are monopolistic or top-ranked globally, with solid tech and uniqueness, supporting the style’s rise.

Funds also think this way. Whether they missed the initial move or are in Changfei and Honghe, they consider: if electronic fabrics and optical fibers can grow, maybe they can develop gas turbines, liquid cooling, high-end PCBs, and tell similar stories. If they can craft a story, they will push the stock higher, attracting internal commentary and debate.

After market approval of Changfei, the logic of hardware price increases and high-end iteration naturally follows—imitation leads to profit effects.
For example, Dazhu, Hengtong, Zhongtian, and Dongcai are now following this pattern (this was before Dongcai’s rise).
Another point: when Changfei and Honghe start stagnating or consolidating, it signals a high-low cut, indicating the market has reached a top for these stocks. The next step is to find the successor—stocks that are surging or hitting limit-up today or yesterday, imitating Changfei’s approach, are likely the next leaders. That’s why I emphasized selecting institutional stocks in recent days.

This is a summarized trend model I’m still refining. It’s based on identifying the profit effect at its start—sometimes I don’t participate directly. When I see it starting, I analyze its style and approach, then find stocks that imitate or expand it. For example, during Chunzhi’s period, I never bought Chunzhi but caught Yingweike; during Zhongyida’s period, I didn’t buy Zhongyida but bought Yong’an Pharmaceutical, Lianhua, Angli Kang. This time, I caught a small part of Changfei, but once I realized its profit effect, I shifted focus—maybe to Dazhu or other stocks like Laser or others (now I know what they are). The key is to follow the leader’s initiation, recognize the profit effect, then find those imitating or expanding it, and finally, add your own perspective—fundamentals, stock traits, and your aesthetic judgment. Over a cycle, select three core stocks and repeatedly trade them for profit.

This is roughly the content of my recent voice notes, simplified. Not overly polished, just understandable.

Additionally, I want to mention the recent stock selection ideas, especially the logic behind selecting new highs yesterday.
Last night, I shared three stock charts:

The core idea is that stocks hitting new highs after the previous night’s earnings report are institutional signals. For example, Nvidia’s earnings release prompted a reassessment of value and strategy. The next day’s layout is crucial—like the previous nodes at 1217, 105, 206, which were institutional nodes, and 2.26, which was a strategic node. Stocks surging to new highs at these points are likely driven by institutions.
This timing helps filter stocks—adding volume and aesthetic criteria helps refine the selection.

Today, Nvidia’s sharp decline reflected market pressure, but long-term, it will continue to rise and hit new highs. The resilience of the A-shares today shows institutional confidence in Nvidia’s fundamentals. Even with a 16% drop, the shortage of computing power remains, and Nvidia will keep setting new highs. This isn’t just fundamental anymore.

A side note: institutional styles differ from most short-term traders. They write research reports, pursue “value investing,” and aim to persuade investors. They’re constrained by many factors. Retail traders can gamble on speculative stocks, but institutions operate within limited scopes. Nvidia’s industry chain, with stable earnings, is their path dependency. I mentioned during trading that institutions avoid Huawei for various reasons—mainly because their focus is on Nvidia’s core business, and they’ll stick with it for years. They might also focus on Musk’s ventures.

Finally, a note on buy and sell points for Honghe and Changfei.
For Changfei, the buy point was around 1.30—initial wave; February 6th’s big bullish candle was the institutional phase. The second buy point was around 2.6, with a large bullish candle indicating style and sentiment growth. The sell point was around 2.24—early profit-taking, with about 60-70 points profit. Once the stock shows consistency, the best move is to sell the core position and let profits roll in, exiting if the five-day moving average fails to hold or the ten-day does. This way, you can quickly find stocks like Dazhu Laser.

Honghe’s pattern is similar: a big leg in early February, with the best buy around 2.9, and a good profit-taking point around 2.24. After selling, you can find Dongcai or other stocks.

That’s about it. I haven’t yet formalized a comprehensive methodology like my previous detailed posts, but I’ll continue refining.

This summarizes my recent trend analysis and stock selection approach, based on voice notes and observations. It’s straightforward and practical—just follow the logic and patterns.