March 27 Review - Preventing a second bottoming out of the index, waiting patiently for April to see the flowers bloom

II. Index Direction, [Taoguba]

Although the index repaired itself on Friday, the trading volume was insufficient at only 1.8 trillion. With this level of volume, there is undoubtedly no expectation for sustained recovery. As we mentioned earlier, apart from specific local varieties in certain directions, most varieties are currently at sell points during the rotation and repair phase. The current rhythm of the index should shift from downward to sideways consolidation, requiring a new period of time to exchange for space. Therefore, everyone should not have overly high expectations for the index.

Next week, the task for the Shanghai Composite Index is to challenge the gap resistance. If it cannot break through, it is likely to adjust downward again. Even if the challenge is successful, given the current lackluster volume, it will at most range for a few days, and it is highly probable that it will need to test the bottom again. Thus, in my personal view, the current index requires a new phase of time to exchange for space in its consolidation, tentatively giving it a two-week timeframe. There will not be any significant trends to look forward to in this next phase, with more internal rotation. A few stronger directions, such as ABCD, will rotate among themselves, but even these will require short-term exits after 2-3 days, awaiting pullbacks to re-enter.

Currently, the index is moving in the opposite direction of crude oil and in the same direction as gold and silver. This means that when crude oil rises, gold and silver fall, and the index falls; conversely, when crude oil falls, gold and silver rise, and the index rises. If a successful bottom can be established around 3800, then the most difficult times will be considered behind us, waiting for a successful bottom in April to initiate a new round of market trends.

III. Sector Direction,

In my personal view, regardless of the perspective of the index, trading volume, market sentiment, or the domestic and international environment, the current market does not support any sector direction for sustained performance. At most, there are localized varieties in specific sectors presenting themselves in a collective manner, while others are either experiencing rapid rotation between sectors or quick internal rotations within a single direction. Most varieties have limited opportunities for sustainability, so I personally do not recommend focusing on sector directions at this time.

As we approach April, without considering external disturbances, the month is theoretically inclined toward performance-driven growth stocks, such as technology, power, lithium batteries, and tokens going overseas. Conversely, the uncertainty from external conflicts corresponds to cyclical stocks, such as oil, gas, chemicals, and electricity substitutes for oil, etc. Of course, there are also strong performance directions within cyclical stocks. Currently, lithium batteries lead in performance within cyclical stocks, while in technology, the leading performance comes from wind and solar storage, and optical communication directions.

However, the current market is characterized by lackluster trading volume and high uncertainty from external conflicts, making it difficult to see any focus in any direction at least for now. Thus, it is hard to provide expectations for sustainability. Whether it’s power-related sectors like the grid, wind and solar storage, or technology sectors like optical modules, or even the recently rotated and explosive lithium battery direction, most lean toward rotation and short-term rises. For instance, in the past few days, the power direction lifted A, then the optical module direction lifted B, and the lithium battery direction lifted C, etc. Meanwhile, previously rising directions began to correct, and this correction was realized; if you cannot grasp the rhythm and do not enter and exit quickly, a two-day correction could result in a drop of more than ten points. For example, this week in the power direction, most varieties corrected by more than ten points in two days.

Although the sector direction has not formed a focus for sustained performance, three leaders have gradually emerged in this round, referred to as the “New Three Kings”: Ningde, Baiwei, and Yisheng. Therefore, as long as external factors gradually release signals of easing, the directions represented by these three leaders have the opportunity to rebound and gradually form a certain sector trend. When the index tests the bottom again, these corresponding directions can be low-key and stealthily accumulated for the next medium-term rotation and rise.

As for the currently strongest power direction and the recently explosive lithium battery direction, the emergence of lithium batteries is driven both by the strong performance of the leader Ningde and by the horizontal fermentation of lithium batteries within the power sector. However, overall, it leans more toward short-term collective sentiment rather than sector trends. At present, it is more appropriate to respond with a short-term collective sentiment approach rather than a sector trend approach, focusing only on the top few collective varieties and new low-level varieties that are poised for rebounds. As for the varieties that previously saw rises, most do not have second-wave expectations and should not be a primary focus.

IV. Sentiment Direction,

Regarding sentiment direction, the strongest is related to power and the recently explosive lithium batteries. In the current market, the previous short-term sentiment has changed; the high points of consecutive boards, consecutive board relays, set directions with a single board, stronger becomes stronger, looking at A while doing B, and low absorption during divergences, etc. are no longer applicable at least for now. Therefore, everyone must adapt promptly; if you continue to use past short-term sentiment techniques, you may easily get stuck in deep losses. Currently, if divergences lead to pullbacks in short-term sentiment, one could realize drops of over ten points in just two days.

Fortunately, the recent power direction has managed to show some short-term sustainability, coupled with the significant breakthroughs of Huadian and Liaoneng, making it relatively easier to work with the short-term collective sentiment in the front row. However, the stronger becomes stronger, the back row rebounds, the mid-cap varieties, and the consecutive board relay directions have yet to restore sentiment, remaining sources of large losses. Therefore, in the current short-term sentiment, if you want to participate, you can only focus on the top 1-3 varieties in each direction for low absorption—definitely low absorption. The current market finds it difficult to generate strong expectations for the stronger becoming stronger.

Currently, the strongest sentiment is in the power direction, which has gone through three rounds: the first round was Yunnan Energy, the second round was Huaneng, and the third round was Huadian Liaoning. Here, in the power direction, one should maintain a level of caution. In the latter half of this week, the power direction experienced significant fluctuations, with a large number of mid-cap and back-row varieties correcting by over ten points in two days, marking the largest correction in this round of power sentiment. Therefore, those still hoping for the power sector to initiate a new round of trends should be cautious. First, the power sector has already gone through three rounds, with the third round of Huadian Liaoning being the strongest. If it is to explode again for a new round, it must either exceed the intensity of Huadian Liaoning or at least not fall too far behind; this is a significant challenge. After all, as the rounds progress, the difficulties increase. Secondly, most power-related varieties have already rotated through a round, and there are very few candidates for a fourth round. Thus, I personally believe that even if the power direction does not end, it will be hard to initiate another wave; instead, most will gradually weaken in their rebounds. If this is the case, in the upcoming power direction, although there will be daily limit-ups, the margin for error will increasingly diminish, so everyone must pay attention.

As for the lithium battery and innovative drug sectors on Friday, currently, they are viewed through the lens of rotation. On Monday, high points will be difficult to catch, but one can look to buy on pullbacks, waiting for Meinuohua and Rongjie to break through five boards before considering whether the back row can explode; definitely do not chase high.

V. Simple Summary

Regarding the index, the current focus is mainly on bottoming out, with wide fluctuations and lackluster trading volume, along with uncertainty from external conflicts, making it difficult to break out in the short term. If the index struggles, then the sector trends will surely not emerge, leading to direct internal rotations across various directions, with localized varieties in specific sectors clustering together. Most varieties in the rotation and repair phase serve as short-term sell points and reduction points.

As for the sector, the current market environment makes it meaningless to consider sector directions for sustainability; it is more practical to respond according to localized varieties in specific sectors clustering together. Whenever the index stabilizes and trading volume stabilizes, for example, when the current 3900-point level maintains an average daily volume above 2.3 trillion, can we consider sector trend directions; otherwise, it will still be a phase of fluctuating rotations.

Regarding sentiment, the strong collective sentiment has somewhat recovered recently, but consecutive board relays, high points of consecutive boards, consecutive board tiers, setting directions with a single board, looking at A while doing B, and low absorption during divergences have yet to recover. Previously, short-term varieties aimed for 100% or 200% movements, but currently, apart from two Huadian, there is almost no capital engaging in short-term collective sentiment rushes. Therefore, in terms of short-term sentiment, one should either focus on low absorption of 1-3 varieties in the front row of each direction or simply low absorption; other strategies are not recommended.