5.14 Strategies During a Short Squeeze Market!

Tangshan Power Generation (sh601991) Brief note: The index is squeezing higher, with trading volume maintaining above 3 trillion yuan. Emotionally, Trump’s visit to China has eased tensions to the extreme, and AI-related funds continue to push prices higher, leading the index upward. In this market environment, how to trade is a question we need to consider. In a squeeze market, if you purely chase high-priced stocks, such as limit-up stocks or stocks making new highs continuously, you might buy at the top. If you watch the market without acting, you’ll feel like you’ve missed out. Here are two strategies: First, clearly distinguish whether the direction and targets you participate in are based on short-term landing or medium- to long-term expectations, so you can buy confidently; Second, follow institutional thinking and explore from the bottom, such as betting on the offshore recyclable projects at the end of May, or SpaceX’s listing in June. These events haven’t happened yet but are expected, along with domestic hardware, Huawei’s industry chain, etc. Next, let’s analyze the index levels and sentiment cycles:

1. Index cycle thinking:

The index aligns with our expectations. After the MSCI’s latest list was announced on May 13, passive funds started buying, such as in the optical and semiconductor sectors, leading the index to rise passively. Subsequently, more passive fund participation occurred until active capital’s selling power exceeded passive buying, prompting a correction. A key point is the MSCI realignment at the end of May, when active funds will likely cash out heavily. Keep this in mind. The above is a reflection on the index cycle;

2. Sentiment cycle projection:

First, Dragon Analysis: Yesterday, we mentioned that China Electric Power LiaoNeng, Jin Tanglang, and Tangshan Power Generation were very strong. Today, after Tangshan Power’s sixth limit-up, market funds are focusing on electricity, power, and computing power sectors. Of course, there’s also news related to computing power. In the early May competition, Tangshan Power emerged victorious alongside China Electric Power, and funds will continue to look for opportunities around these sectors. The main logic here is that the foundation of AI is computing power, fundamentally trading the AI industry chain, so pay attention to this later;

Second: Opportunity analysis: Currently, the index is squeezing higher, and sentiment is extremely polarized. All branches of AI are very strong, such as optical modules, storage, semiconductors, and computing power, while other sectors rotate, like lithium mining, aerospace, pharmaceuticals, and real estate. From this perspective, the main theme remains AI. For AI, expectations also include the domestic hardware industry chain and Huawei’s industry chain. Recently, domestic CPUs and other components have shown unusual activity, and Huawei’s Ascend chips have bottomed out. Huawei’s super nodes are expected to ship in the second half of the year, with Ascend and Kunpeng also having opportunities. If negotiations fall through or no concrete results are achieved, domestic chains will attract even more capital attention. Besides, aerospace remains promising, especially as a theme during the performance off-season in May and June. The offshore recyclable project at the end of the month still has many highlights, and SpaceX’s listing next month is one of the biggest events in the capital market in recent half a year. Keep an eye on this, especially when overseas AI chains adjust.

Special reminder: The above information is for reference only and does not constitute investment advice. No stock recommendations are provided! Investing involves risks; please proceed cautiously!