Investment Advisor Perspective: The market has experienced a correction, can it stop falling tomorrow?

May 12, investment advisor Huang Linjie said in today’s market analysis that after the overall market continued to rise on Tuesday, a correction appeared—this is completely an expected trend. He said that after the market broke through the neckline yesterday, it formed a new upward channel, and it is currently near the upper boundary of the upward channel; therefore, a pullback or sideways consolidation is highly likely. This does not mean that the market direction has changed.

From the data perspective, today the bears are in a favorable position. As of the close, only 1,275 stocks rose, while 3,846 declined. The number of declining stocks is far more than the number of advancing stocks, indicating that the bears’ selling pressure is starting to ease. Today, there are more than 140 stocks whose declines exceeded 5%. Bearish selling pressure increased significantly. The market’s adjustment is a normal phenomenon. There are still 57 stocks at the daily limit up, whereas in the past two days, the daily limit-ups were around 180 to 100+ each day. This shows that the strength of the bulls is weakening while the strength of the bears is increasing. In addition, Huang Linjie also noted that today’s market trading volume shrank, but the shrinkage was not large. The two markets saw a reduction of 296.2 billion yuan, with total trading volume of 32,427 billion yuan; trading activity is still relatively high. He said that as long as the trading volume does not shrink to below 3 trillion yuan, investors do not need to be overly nervous—only the difficulty of trading will increase.

From an individual stock perspective, today high-priced stocks began to fluctuate up and down near the high levels; they could not hold limit-ups, and there are clear signs that chips are loosening. Huang Linjie believes that it is unlikely for these stocks to ignite market sentiment. Combined with the fact that the market is near the upper boundary of the upward channel, it is expected that the market will continue to fluctuate and consolidate around 4,200 points for a period of time.

Overall, the correction that appears after the overall market breaks through the neckline can be understood as a pullback after the breakout, but it should not fall back within the neckline. Looking ahead, if the index again misses the neckline and falls below it, the pressure from the adjustment will increase. For investors, if they want to reduce positions over the next two days, they can keep an eye on the neckline. As long as the market pulls and pushes in a back-and-forth pattern above the neckline, investors do not need to be overly concerned. After all, the market’s overall uptrend is relatively obvious, and there are no clear signs of panic in the market. Although there was a correction during today’s session, market sentiment is still relatively steady.

(Editor-in-charge: Zhang Yan)

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