Everyone is saying this pullback is a chance to buy in, but I haven’t seen enough reason to believe that. The list is full of stocks that have been cut in half from their highs, which looks tempting. But a 50% drop doesn’t mean a stock is cheap—it could also mean the fundamentals have changed. Take some new energy and consumer stocks: they’ve pulled back 50% or even 60% from their highs, and their valuations have fallen from 60x to 30x. On the surface, they look “half off,” but if industry growth has slowed from 30% to 10% and the inventory cycle hasn’t bottomed, 30x may not be cheap. For example, a leading new energy company has fallen about 55% from its high, with its valuation dropping from 60x to 28x. But monthly sales growth has slowed from 30% to 8%, and inventory days have risen from 45 to 70. The “bargain” here comes with a decline in both industry momentum and earnings expectations. Then there are consumer stocks that have fallen 50%, with valuations dropping from 40x to 20x—but channel inventories are still high and end-market sales remain weak, so 20x may not be the bottom either. On the other hand, some stocks have pulled back just 15%, with their weekly trends intact and earnings expectations still being revised upward. Those may actually be better positioned. So I don’t focus on “how much it’s fallen”; I first ask “why it fell.”

I look at the weekly chart for the trend, and I don’t rush to buy the dip before the medium-term trend turns. Specifically, I look at whether the stock is still below its 20-week moving average, whether the weekly MACD is still weakening below the zero line, and whether any rebound is accompanied by volume. Before the medium-term trend recovers, a daily-chart bounce can easily turn into a pause in the downtrend. I set my stop-losses too tight last time and got stopped out twice: once, I set a 3% stop, but the stock moved 5% intraday, so I got stopped out right before it bounced back; the other time, I set a stop 2% below the platform low, and the next day the stock reversed and reclaimed that level. After those two experiences, I learned my lesson: the entry point matters more than the story. Now I’d rather wait for the weekly chart to stabilize, for the stock to retest its previous low without breaking below it, and for trading volume to contract to around one-third of the level at the previous high before considering scaling in. I wouldn’t jump in just because someone says “the fundamentals haven’t changed.” For example, if trading value was 2 billion yuan at the previous high, a drop to around 600 million to 700 million yuan would suggest that selling pressure has been largely exhausted. A retest that holds above the previous low is also more informative than simply having “fallen a lot.”

So in this pullback, I’d rather put “how much it’s fallen” on the back burner and focus first on “why it fell, whether the weekly chart has recovered, and whether volume has contracted.” Which of these do you think is a genuine pullback, and which is a trend breakdown? Share your thoughts.