Hexun Investment Advisor Wu Zhipeng: V-shaped Reversal on Friday, What Should We Do Next Week?

Black Friday brings a V-shaped reversal—does that mean the A-share market will be stable next week, and that the upward move will then accelerate?

Wei Zhipeng of Hexun Investment Consulting said: “Let me share my view at this position. First, don’t be in a hurry. At this time, don’t be overly optimistic that this market, this index, can run too high. As of now, the pressure level for the Shanghai Composite Index still exists between 3960 and 3930. Why do I say there’s a possibility of a surge followed by a pullback next week from this level? Let’s review the trading action with everyone.

On the board, the first point is that today’s rebound is a shrinkage-volume-type rebound. What does that indicate? It suggests there may be signs of bull-trap maneuvering, right? The second point is that the sectors that rose today are basically all small-cap stocks, mainly—first of all—lithium mining and pharmaceuticals. These two directions have news-driven stimulus. Other directions are relatively scattered and mixed. But the directions that fell today were comparatively uniform—mainly weighty sectors, such as banks, coal, insurance, power, transportation, and water utilities. These are all large-cap, high-weight index sectors. So from two perspectives, the market’s current shrinkage-volume rebound lacks continuity.

Thirdly, after dropping from 4200 points, and going through the accelerated selloff process in the early stage—around 4200 to 4150, and even below 4000 points—people will notice that the lowest point at 3794 roughly came from which day’s trading on Tuesday this week, on that big bearish candle? Who pulled it up—was it banks? When the banking sector was pulled up on massive volume, we saw that day a kind of “ice point” situation. Why does a move to the ice point necessarily come with massive volume? Because there were more sellers, and at the same time, some bargain-hunters started stepping in that day. So when buying and selling are both elevated, the trading volume naturally becomes much higher than in the prior few days. This is the logic behind the ice point. When you reach the ice point, it means buying funds have started entering the market to bargain-buy.

When banks enter to bargain-buy and then the next day stabilizes, on the third day technology starts to refuel and rise. With weighty banks propping the stage, technology outside the banks then comes out to take the spotlight. But it’s very clear that technology has not really managed to close the gap, and it hasn’t delivered a big “turnaround and rebound” surge effect.

So today is also a small-cap stock rebound. Therefore, regarding this kind of行情, big players’ view is that why next week will still need to surge then pull back, and also may have the possibility of continuing to press down further and test the levels properly. Our strategy is what—to do what? Don’t chase after a rally; when the market falls, try to make bargain buys.

(Editor: Shao Xiaohui)

     【Disclaimer】This article only represents the author’s personal views and is not related to Hexun. Hexun’s website remains neutral with respect to the statements, viewpoints, and judgments made in the text, and does not provide any explicit or implied guarantee regarding the accuracy, reliability, or completeness of the content. Readers are only for reference and should bear all responsibility themselves. Email: news_center@staff.hexun.com

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