Hexun Investment Advisor Su Ligang: What does filling the gap downward mean?

Today’s market action actually brought up a very interesting development: in the afternoon, the broad market was closing the gap. The overnight gap from yesterday was only short by about three to four points—two to three points, even. Yet it hard-headedly took an hour and a half to finally fill that gap. Of course, the gap was ultimately filled. So what does it mean once this gap has been completed? What does the fact that it took an hour and a half to fill the gap imply?

As analyst Su Ligan from Xunxi Investment Consulting analyzed: we told everyone yesterday, and we said that Wednesday is an important time window. In fact, if there were to be a rise on Wednesday, then Thursday is more likely to see a pullback. So today is Thursday showing a pullback—does that mean the market on Friday will keep probing lower? Or, after the confirmation is completed, is the market about to welcome a new upward trend?

Let’s take a look at the details of today’s market. In fact, today the overall market sold off throughout the day. After the early session surged up, it formed a clear “waterfall” drop. Then in the afternoon, this sideways movement is clearly the result of capital coming in to take over—supportive bids. It’s different from the selloff on Monday; its nature is different. It’s built on the repair over two consecutive days—after what we call the slowdown in momentum. The structure it forms under this condition, in my view, is a healthy state, essentially a pullback confirmation after the repair.

For tomorrow, personally, I believe the market still has expectations to continue probing lower. But the key point isn’t the probing lower itself. At this point, you don’t need to worry too much about the downside probing. More importantly, we need to watch whether there will be a bottoming-and-rebound move during that downside probing. If, for example, on Friday there is a bottoming-and-rebound move, then next week’s overall environment will depend on the repair-structure outlook.

From the perspective of trading response, we can actually find some opportunities to make short-term price differentials. For instance, during the process of local rotation, some severely oversold assets might very likely show signals of large-volume bullish candles at any time. At this moment, we should focus on that. So, for the short term, my suggestion is that everyone should increase your patience—patience—waiting for the assets you hold to produce a large-volume bullish-candle signal.