Hexun Investment Advisor Wen Taibin: Decreasing volume doji star, is a short-term trend reversal imminent?

Does a stock index with shrinking volume and a doji indicate that a trend reversal is coming? According to Hexun Investment Advisory analyst Wen Taibin, the probability of a short-term trend reversal is very high. The two possible ways the reversal could play out next, and the two different response strategies, are also different. Old Wen will lay it out clearly for everyone.

The first approach, based on how conflicts in the external environment ease, would mean that tomorrow the stock index can continue moving upward—this would be a reversal to the upside after a streak of four consecutive down days. Is this rally a real advance or a rebound? The resistance level remains unchanged at 3950~4000 points. When it reaches these levels, you should reduce positions.

The second scenario is that if conflicts in the external environment intensify, then it’s possible that the market could open lower and trade weakly, forming a trend of intermediate relay decline. On the downside, the key point is whether the support level around 3800 points can form a second “leg.”

In terms of how to respond: if a second “leg” forms, the contact could create a short-term bottom-picking opportunity—we’ll look at it then. But those who are familiar with Old Wen know that since the Shanghai Composite Index at 4197 points, we believe all the declines are part of a large wave four correction. A large wave four correction takes a relatively long time, and the price action is also more complex. Therefore, at this stage, all up and down movements are corrective in nature. So overall, the trading profitability is not good; bottom-picking should be done cautiously. Still, you need to control your position size—especially, for every rebound upward, the increase should mainly be treated as something to reduce.

（责任编辑：王刚 HF004）

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