[Red Envelope] Happy Stock Trading: Complete Breakdown of the Mindset for Switching Between Escaping Tops and Panic Weak-to-Strong Transitions

Good evening, friends! In the previous post, I shared with you the concept of happy stock trading—doing simple things repeatedly. I believe those who followed and read it carefully have benefited greatly. If you haven't read it carefully, feel free to go back and take another look. [Taoguba]

Now, looking back at the market rhythm this week, it really confused many people: In the first half of the week, storage stocks led the rally, followed by continuous high-level sell-offs later on. Especially on Thursday, there was a massive divergence and panic. On Friday, there was a rapid weak-to-strong shift with uneven recovery, while stocks that held up during Thursday's big divergence ended up falling sharply on Friday. There were pitfalls everywhere, and it was extremely challenging—everyone could see it. Therefore, without the right rhythm and proper position control, it's easy to experience rapid drawdowns. Throughout the entire process, the essence of market ups and downs is the game of human nature: greed when rising, fear when falling. Most retail investors trade based on emotions, naturally getting hit on both sides.

Here, we stepped away from the crowd's emotions and completed a full cycle of "escape the top → wait for divergence → re-focus": On June 29, GigaDevice showed a divergence signal during its rise, so we canceled tracking. After extreme panic on Thursday, the robotics sector showed a shift to strength signal on Friday, especially a stock like Estun Automation, which had trend resonance, and we promptly tracked it mid-session. Today, using these two real validation cases, combined with contrarian thinking, macro judgment, and expectation fulfillment techniques, I will thoroughly explain the switching mindset between escaping the top and panic weak-to-strong shifts within our "happy stock trading" system.

          Where the crowd flock for profit, it's exactly the time to retreat with success.

I. Review: Why was it necessary to cancel tracking of GigaDevice on June 29?

Many say this is "good luck," but in reality, it was the inevitable result of our trading system combined with macro judgment, where three major top-escaping signals triggered simultaneously—no gambling involved. From the broader macro perspective, at that time, the storage sector had been continuously rallying, market sentiment was fully euphoric, and positive logic had been fully realized. News of storage price increases and improving earnings was known to everyone. When the entire market is unanimously bullish, it means short-term expectations are fully priced in, the upside space is significantly compressed, and a turning point is imminent. This was the core reason why I warned of risk in advance.

Signal 1: Short-term rally space reached, the stock showed a top divergence in its rise, and the two resonated as a bearish warning signal.

For GigaDevice, the first wave (end of April to late May) had a rally space of about 70%, and by June 29, the second wave had also reached about 70%. Based on the principle of equal space between the two waves, the short-term space was about enough. At the same time, during the early morning session on June 29, the stock continued to rally rapidly, showing a volume-price divergence on the intraday chart, as well as a daily divergence. The resonance of these two divergences, combined with the principle of space nearing its limit, served as a signal to cancel tracking on the left side, indicating that bullish momentum had significantly weakened. This was the most direct warning to escape the top. Contrarian interpretation: The more the stock price rises, the more retail investors think "it can still hit new highs" and rush in to buy; meanwhile, smart money quietly exits using the euphoric sentiment. The greed of the masses is precisely the best time for major players to take profits.

Signal 2: Mainline rhythm signal—the sector reached a second climax, combined with the strength of the leader's recovery and sector changes.

At that time, the entire storage sector surged collectively, and sentiment reached a peak. However, GigaDevice, as the leading giant stock of the sector, showed a "sector recovery but its own divergence" trap signal. When the leader diverges during a sector climax, it indicates that funds are no longer clustering around it. Moreover, the earlier pioneer stocks in the sector did not show the same recovery strength as on June 24. During the market divergence on June 28, the overall recovery strength on June 29 was weaker than that on June 24, indicating weakness. In other words, it weakened each time, and this meant that the turning point toward divergence had already appeared. Macro judgment: In a mainline trend, the leader is the wind vane. A divergence and weakening signal from the leader indicates that the overall upward momentum of the sector has slowed down. Even if there are still local opportunities, the overall risk far outweighs the potential reward.

Signal 3: Stock price deviated from the 5-day moving average + realization of positive expectations

After the stock price continuously deviated from the 5-day moving average, it showed a divergence at a high level. According to our rule of "don't guess the top, just follow the trend," we secure gains first and don't gamble with the market on "whether it will hit new highs again." Additionally, if the stock was not canceled on June 29, it would have been a cancellation point by the close of the next day, as the candlestick pattern would have formed a bearish combination (previously shared as a bearish signal).

"Storage price increases" and "earnings expectations" are indeed hard to let go of, but the risk after a sustained rise is very high. Let me share another expectation fulfillment technique: When a theme's positive news is repeatedly hyped and everyone in the market is talking about it, it means "news is priced in." At this point, prioritize taking profits rather than adding positions. At the same time, the stock itself was speculated on the logic of CXMT's listing, and as the timing of CXMT's listing approaches, it also represents the fulfillment of that expectation. Escaping the top is never about being bearish; it's about conforming to the macro trend, fighting against greed, securing certain gains, and waiting for the next better opportunity.

Here's an additional sharing point: When a leading stock in a tech sector shows signs of a top, other individual stocks should only be viewed with a arbitrage mindset (e.g., canceling tracking of Do-Fluoride on Thursday and canceling tracking of Lead Intelligent Equipment on Friday were based on this consideration). That means if something looks off, cancel tracking immediately, rather than blindly holding on. This rule is mostly effective across various thematic applications.

The market masses are panicked, but the strong wait calmly for new life.

II. Breakdown: After Thursday's panic divergence, why did we dare to track Estun Automation mid-session on Friday?

On Thursday, the tech sector collectively plunged, the market was in chaos, and many core stocks in various sub-sectors closed at their daily limits with panic spreading everywhere. Many people were panicking terribly. This is typical retail investor thinking: fear when it drops, blindly following the crowd to sell. But we stepped away from the panic, closely watched for sectors that exceeded expectations the next day, and shortly after market open on Friday, we noticed the robotics sector exceeded expectations and tracked the core stock Estun Automation mid-session. Many people asked me: "Aren't you afraid it will continue to fall?"

Actually, what I did was not "bottom fishing" but confirming the weak-to-strong signal during panic divergence. Again, three major signals were satisfied simultaneously, fully implementing contrarian trading, macro control, and waiting for expectations to be fulfilled. The rest is left for the market to validate.

Signal 1: Solid logic; panic divergence only washes out weak hands.

The robotics theme is not a one-day wonder. Catalysts this week were clear: industrial policies + new progress on Tesla Optimus + mid-year earnings expectations + Unitree IPO. It is a sector with fundamental support (nearly one trillion in sector trading volume). From a macro perspective, the thematic logic has not been fully fermented, and the positives have not yet been fully absorbed by the market. The trend is far from its end. Contrarian interpretation: When the market drops sharply, retail investors habitually turn fully bearish, cutting losses indiscriminately regardless of quality. But truly strong, expected mainlines will not end simply due to short-term index corrections. Panic is merely a tool to wash out weak hands.

Signal 2: Strong intraday support, clearly resilient during panic sell-offs.

During Thursday's market sell-off, many stocks fell sharply along with it, but Estun Automation showed clear resilience on the intraday chart; panic selling couldn't push it down, indicating large capital was quietly absorbing. On Friday, as soon as the index stabilized slightly, it was the first to turn red, quickly breaking through the intraday moving average. This is the "attack signal" of a mainline leader during a divergence day, and the prototype of a weak-to-strong shift had already appeared. Expectation fulfillment technique: Strong themes use market divergence to complete a final round of chip exchange. Once panic selling exits and chips stabilize, the previously accumulated positive logic will be triggered again, entering a new round of expectation fulfillment. This is the core logic behind our divergence-to-strength tracking.

Signal 3: Pattern signal—matches the high-probability pattern of "strong mainline mid-session tracking the day after a major panic divergence."

Our system never chases climaxes; instead, we look for opportunities to take over mainline leaders during divergence. Thursday's panic gave us the perfect node to observe the support of the expected leader, and the mid-session tracking on Friday was a follow-through after confirming the weak-to-strong signal. It was not a gamble on a rebound but a high-probability move on the start of a main upgrade. This is a repeat of the "simple things done repeatedly" mentioned in the previous post.

            Every advance and retreat is a mental technique; gains and losses reveal the true heart.

III. Core Mindset: Escaping the top and panic weak-to-strong shift are essentially the same thing.

Many people think "escaping the top" and "bottom fishing" are opposite operations, but in our "happy stock trading" system, their underlying logic is completely consistent. Ultimately, trading comes down to macro judgment, contrarian composure, and control over the rhythm of expectation fulfillment.

Mainline Priority: Always follow the mainline, don't mess with minor themes. Whether it's the storage mainline with GigaDevice or the robotics mainline with Estun Automation, both are core leaders within the mainline or expected mainline. Only the divergence-to-strength of the mainline is our opportunity; the sell-offs of minor themes are nothing but a bottomless pit. To judge the macro trend, the first step is to distinguish between mainline and minor themes. If the direction is wrong, all efforts are in vain.

Discipline Above All: When signals appear, execute according to the rules without hesitation. When a top-escaping signal appears, don't be greedy; cancel tracking first. When a weak-to-strong signal appears, don't hesitate; follow the pattern and focus. Don't guess tops, don't bottom fish—only trade within the pattern. The biggest weakness of retail investors is emotionality: greed when rising, fear when falling. The prerequisite for stable profits is to use discipline to constrain human nature.

Simple Repetition: Repeat the pattern of "escape the top, wait for divergence, re-focus" correctly. Many people find trading exhausting because they are always guessing tops and bottoms and chasing hot themes. What we need to do is to correctly repeat this "follow the trend, plan the situation" pattern across different mainlines. Summarize a universal logic based on the rhythm of expectation fulfillment: Early positive phase—boldly position; mid-fermentation phase—hold and wait for rise; when positives are fully disseminated and known to everyone—decisively take profits and exit; if the thematic logic is not exhausted and short-term sentiment is oversold—enter during mainline divergence or the next weak-to-strong shift. No need to catch limit-ups every day, no need to go all-in every day. Do simple things repeatedly, and naturally you will feast on the confirmed main upswing. However, it won't be 100% correct. As long as you do this most of the time, the overall trend will remain upward.

        Drive the market with rules, manage accounts with reverence, step by step for longevity.

IV. Next Operation Thoughts (Macro Judgment + Response Techniques)

Mainline Tracking: The overall macro trend remains thematic rotation and structural market conditions. There is no comprehensive bull or bear market. Continue to watch for confirmation of the robotics mainline's sustainability. Currently, the thematic positives have not been fully realized, and there is still upside space. For the storage mainline, driven by Biwin's earnings catalysts, a new round of earnings expectations is starting to ferment. Mid-year reports with super-expectations may also see spreading opportunities. However, we need to watch for whether expectations are exceeded, then manage and respond accordingly. Watch both sides, rotating across cores.

Trading Rhythm: Stick to contrarian trading: don't blindly chase highs, don't panic during drops. During climax phases, when positive expectations are realized, actively take profits and exit. During divergence phases, when sentiment panic overshoots, focus on the mainline for support opportunities. Always move opposite to the crowd's emotions—be a contrarian trader.

Expectation Fulfillment Response Techniques:

1. High-level targets: If positive news is repeatedly hyped and the market is unanimously bullish, treat it as fully realized expectations—mainly reduce positions and exit.
2. Divergence targets: If the core logic still holds and positives haven't materialized, treat it as expectations waiting to be realized—enter during divergence, hold and wait for the start of the move.
3. New themes: Solid logic with continuous catalysts—prioritize positioning to capture the full expectation fermentation cycle.

Risk Control Reminder: No matter how smooth the market is, always set stop-loss and take-profit levels. Never go all-in. Keep ammunition ready to seize opportunities during divergence days. By judging macro trends, utilizing human nature, and controlling expectations, you can achieve long-term survival in the market. Every attack we make comes with defense, bringing us closer and closer to the unity of knowledge and action.

Let's enjoy happy stock trading together. Wishing you all prosperity, friends!