Hexun Investment Advisor He Bing: Shrinking volume pullback, reversing to pick up?

Another bearish candle is coming in today— is this a reverse gear to pick people up? After yesterday’s peak for innovative drugs, today continues to strengthen further. How many more days can the main theme still run? Optical communications is still holding up, continuing to look down on all rivals—what should we do next? As for other directions, is there really a future?

As I said yesterday, the overall market has low volume, which counts as a small peak. All sectors are sell points, and there’s only one direction that’s a buy point—only pharmaceuticals are a buy point; other directions are all sell points. Look at today: all directions have started to dive. The number of advancing/declining issues, the SSE index, and small-cap stocks are all weakening.

A friend asked: today it turned down again, about to enter a small “ice point.” Is the end-of-day a bottom-fishing opportunity? This is a good question. The market is already in a consolidation phase. If end-of-day panic really increases, with the number of stocks rising falling below 1000, you can bottom-fish. But note that tomorrow’s early session may still bring another wave of panic. So today, hold the position into the close to get a head start; doing rolling “T” tomorrow is the best approach. After the U.S. stock market rallied for two consecutive days, today some negative news came out during the session. Most likely, tonight the U.S. market will do a “head-in-hands” selloff again. So in China A-shares tomorrow, the opening call auction likely still brings panic. The premise is that today continues to close higher.

Today, major indices again broke below the 5-day line—rubbing back and forth. Even the strongest small-cap stocks have turned down. When bottom-fishing, it comes down to two points: control position size, and move fast in and out. If you want to bottom-fish, I suggest bottom-fishing the broad market and using ETFs. In terms of technology stocks: after the U.S. stock market’s tech sector has rallied strongly for two days, if U.S. tech adjusts tonight, A-shares tech tomorrow’s early session will also face pressure. So bottom-fishing should be mainly through ETFs.

For the outlook on the overall market later on, it’s still two words: grind the bottom. Small-cap stocks today have already broken below the 5-day line. Although the SSE index hasn’t broken below the line thanks to bank-sector support, the STAR Market 50, CSI 500, and the ChiNext are all already broken down. The overall market likely still needs a second pullback, such as 3900, 3880, 3850—depending on the news environment. Has the rebound from the overall market ended? We still can’t draw a conclusion. We can only draw the conclusion of grinding the bottom.

As for sectors: the CPO sector has stayed in consolidation today, down 1.2 percentage points; optical communications is slightly stronger, down 0.05. Money is still flowing into tech, but after U.S. tech rallied strongly for two days, A-shares tech tomorrow will face some pressure. If U.S. tech drops significantly tonight, A-shares will be affected.

The key is innovative drugs. I said yesterday: innovative drugs saw a rise in both volume and price. The early-session divergence is the opportunity to “reverse gear to pick people up,” similar to yesterday’s script. After 10 a.m. the spark was lit, but later—dragged by the index and impacted by tech—rotation across other sectors caused pharmaceuticals to pull back a bit. But it’s not a big problem, because today’s volume keeps expanding and the core products continue moving forward. Of the core names I mentioned yesterday, they still made new highs during today’s session. In the afternoon, we need to see whether they continue moving forward as a tightly held group. Overall, among all directions, pharmaceuticals are the best at absorbing and carrying through.

As for commercial aerospace and power sectors and so on: commercial aerospace doesn’t need to be looked at, and power continuing to get cut down doesn’t need to be looked at either. Yesterday I pointed out two directions: optical communications and innovative drugs. Other directions should be avoided across the board.

(Editor: Zhang Yan)

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