[Offense and Defense Strategy Pre-Market Thoughts] — April 7

Good morning, brothers! [Taoguba]

Since returning to the market, I’ve been telling everyone that the market’s medium-term structure is still within the adjustment cycle. Among all of this, the most certain—and the one with the biggest rebound—was also the wave I reminded everyone about at the end of the day on March 23. On the intraday high of March 25, there wasn’t much space left. After that, although the index slowly ground its way to fill the gap, in reality, the difficulty of trading in the market during this process was extremely high. For most of the time, it was 4,000 stocks declining every day. Last Friday, this kind of tragedy continued to play out. The index’s medium-term adjustment structure has not changed at all. And for the Shenzhen Component Index and the ChiNext, their short-term consolidation structure’s focus has started to tilt downward. That means here, not only does the medium-term structure continue to maintain a downward tendency, but the short-term consolidation trend is also starting to face challenges. The probability of the Shanghai Composite Index going on to make new lows afterward is increasing. The next smaller support for the Shanghai Composite is around 3,850, and the bigger support is around 3,800. As for resistance, first look at the 5-day moving average. Until the 5-day line holds, don’t look at the other resistance levels first.

As for short-term sentiment, we need to talk about it separately. On the 10cm side, Friday’s performance was pretty disappointing. There were quite a few large bearish candles appearing in the consecutive-board lineup. Even the recent high-position core names also saw batch follow-up declines. There are also a few fairly extreme ones—such as Liaoning Energy, Zhejiang Xinneng, and Jinkai Xinneng. These stocks showed an outrageous, ongoing “A-kill” trend. The trial-and-error cost is still relatively high. Here, you need to wait until this kind of extreme “losing-money effect” becomes clearly calmer, or after there is some active repair—only then are the conditions for short-term “meal-taking” opportunities to show up again. Until then, at most it’s just trial-and-error. In terms of the sentiment “anchor,” at the open, you mainly observe whether Tongda Shares and Xinzhonggang are going to show a “nuclear button” pattern. If they do show a nuclear button, or if after the open they quickly lock the limit-down, it means sentiment is still fairly extreme, and the probability of strong intraday repair drops further. Conversely, if these two targets perform mildly or show active repair actions, then the probability of intraday sentiment repair is relatively higher. On the 20cm side, the situation is relatively better. Not only did it produce a near-4-board type like Xinghui Materials, but on Friday, amid the market’s big drop, it also collected 8 daily limit-up boards, setting a recent new high. We actually had already told everyone one or two trading days in advance to pay attention to whether the 20cm segment will gradually strengthen. Judging from the current situation, the tendency to switch from 10cm to 20cm is becoming even more evident. In considerations for the subsequent game plan, under the same conditions, you can prioritize 20cm.

Right now, the market’s biggest problem is still that it lacks direction. This is also something we’ve been saying repeatedly recently. When the macro logic’s risk can’t be disproved, it seems that all short-term, mid-term, and long-term logic temporarily can’t really come into play. Last Monday, topic continuity was very bad all week. Almost the direction that had a big rise today, on the next day most of it was a big drop. Unless you bought the two or three strongest stocks within the strongest intraday direction—if your reaction time was just a bit slower, you’d be the one taking the orders. Short-term speculation is, after all, speculation on the extreme explosive power of the short term. But right now the topics have no continuity at all, and let alone explosive power. So this situation also needs to be fundamentally resolved before the short-term market can be easier to trade.

At present, it looks like there are still quite a few potential problems in the market. Before these problems are fundamentally resolved, you’ll find that even if the index rebounds, and even if there’s some mild repair, short-term trading still remains very difficult.

So for friends who want to be more steady, just keep waiting for the market to become clear before doing anything. Not stirring things up may help you outperform most people. For more aggressive friends, it’s also recommended to control your position size—don’t bet your whole life savings, and don’t use leverage.

We’ll talk about the rest during the trading session. Wishing the brothers smooth trades.

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