Power7 consecutive gains, Friday first decline! Can we still do repairs tomorrow?

Indices struggled to stay strong on Thursday but fell again on Friday! What caused this? Mainly due to risk aversion sentiment, as external uncertainties increased. After Iran’s President Ebrahim Raisi issued his first public statement since taking office, emphasizing the continued closure of the Strait of Hormuz until U.S. troops withdraw, the core goal is to push up oil prices and cause inflation. This pressure is hard for gold to accept, so now the game is about the oil war. [Taoguba]

Over the past two weeks, everyone knows that oil and technology are like a seesaw. On Friday, computing power and AI led the decline, and by the close, oil also saw funds taking a position early. Do you remember March 2nd, the day oil exploded? Related to oil is a sub-sector called methanol within chemicals, with Jinniu Chemical as the core, which was the second-largest order on March 2nd. Intercontinental Oil & Gas had 2.74 billion, Jinniu Chemical 1.44 billion. On March 10th, the chemical sector’s core strength surpassed that of oil. Everyone wanted to bet on oil, but it’s too risky. The logic of chemicals is second only to oil, and the chemical sector outperformed oil, so funds shifted to betting on chemicals. The chemical sub-sector related to Iran is methanol, with Jinniu Chemical as the core, so before Friday’s market open, I shared that this direction could only involve betting on Jinniu Chemical.

Let’s continue reviewing Friday. The market opened lower, rallied, then fell back, and in the last hour, it declined again with increased volume. The strongest theme was chemicals. Looking at the sector’s intraday chart, it also shows a typical rally and fall. The wind power sector, which resonated with the market on Thursday, also formed a bearish candlestick. How will the market move next? Let’s analyze the thinking process. First, review the March 13th bidding analysis:

• Central South Culture’s merger had no impact on sentiment.
• Kuntai Co., a stock with positive news, had a 578 million order, but positive news often leads to negative feedback.
• Hengtian Hailong’s merger and restructuring had no impact due to prior fund positioning.
• Green Power was a one-word move as expected, with Thursday’s power sector rally, so Friday’s divergence was anticipated; this should be avoided.
• Luxin Technology was a chemical sector leader on Thursday, also within expectations.
• Zhengzhou Coal & Electricity, despite only 81.53 million in orders, slightly exceeded expectations because coal stocks only hit limit-up three times on Thursday, and only after 11 am. The one-word move on Friday was slightly above expectations and had some influence on the coal sector, driven by the oil war logic.

Since there were no new signals from the bidding, the strategy was to buy on dips and hold. The Thursday sector explosion centered on Zhaochi Co., which recovered after two days of correction. The first leader on Friday was Guojiyiliao, which rebounded after two days. Even if it failed, it provided a rebound opportunity. The market shows that even a one-day theme can recover or rebound after two days of correction. So, we look for recently strong stocks to wait for a pullback to buy. On Tuesday, Yuhuan CNC was the only second-tier robot stock, initially mistaken as an industrial mother machine, but I corrected during bidding that Huadong CNC is the core of industrial mother machines. Yuhuan CNC, Apple, and multiple concepts of industrial mother machines, after two days of correction, were shared before Friday’s market open, and it barely held the close. The logic of holding is trial and error, focusing on odds. During the day, I also took early positions in Huadong CNC and Yellow River Cyclone, but only Yuhuan CNC gained 13%. The intra-day positions in Huadong CNC and Yellow River Cyclone retraced 3%, but the idea remains unproven. Currently, the market is very challenging, so a cautious approach is best.

Market outlook: The market is oscillating. As mentioned, when it’s time to act, we will. Since the geopolitical conflict, global stocks have been volatile, but China’s indices have outperformed the global index by 1.4%, with the CSI 300 barely falling. A worst-case scenario, though unlikely, should be considered: the index’s bottom line is 4050. If it hits that again, unconditional liquidation and defensive measures are necessary.

Minor trend: The market is rotating without much movement, with recent strong themes like computing power, AI, and smart grids leading the decline. Tomorrow, we’ll see if new themes emerge. If no new themes appear, we must defend; if new themes do appear, we should seize the opportunity.

Market sentiment: Over the past three days, more than 3,000 stocks have fallen, with many hot stocks from previous days hitting limit-down. The loss effect is obvious, but don’t worry too much. By Monday, this panic should be mostly released.

Hot sector analysis:
Electric Power: Seven consecutive days of gains, with Friday’s divergence as expected. Can the sector recover? Leading stocks like Yuedong Youneng and Shun Na all hit limit-down. If Friday opens with a panic drop like March 4th, we might consider a recovery play, as it’s a safe bet—bottomed out that day, no more downside, and at worst, a shallow rebound the next day. If it opens flat, wait for divergence for safer entry.

Computing Power: The sector experienced three consecutive bearish candles, with data centers reversing, and core stock Shun Na also hit limit-down. The rebound is limited.

Chemicals: Small steps upward, rising one day, falling the next, showing resilience. But Friday also saw a rally and fall. The strongest sub-sector is methanol, with Jinniu Chemical as the core. If you haven’t bought in yet, don’t chase now. If oil futures crash someday, dragging A-shares down, and methanol falls passively, we can consider low-positioning in Jinniu Chemical.

We’ll see if tomorrow’s market provides new directions. If hot sectors emerge, we must act quickly.

Summary: Last week, no new core themes appeared, but the market experienced rapid rotation. Rotation strategies have their place. Although big gains are unlikely, maintaining a steady approach in safety is best. We remain ready for new hot sectors to emerge.