Sector rotation, controlling positions, and locking in profits!

The broader market shrank in volume last Friday to less than 1.7 trillion yuan. Previously, I said that whether the market falls or stays in a sideways, choppy consolidation, it’s one of the main forces’ “distribution-washing” playbook. This contraction in volume also suggests that whether it was panic-selling or those “bloodied” chips, they’ve already been washed out relatively thoroughly. When volume contracts to the extreme, it essentially means there are no more chips that will come out again. In this market, the only time a volume contraction doesn’t deceive us is—never.

The slow bull trend remains unchanged. So whether the conflict in the Middle East continues or talks resume, as long as no nuclear incident occurs, for our A-shares there won’t be any systemic risk.

Given the current moves in overseas markets, and with China’s A-shares still in a slow bull trend, the broad market will most likely continue to trade sideways and consolidate between 3850 and 3950.

Tomorrow, Tuesday, the opening is likely to be a gap down followed by a move higher. Sector rotation will be relatively fast. During the sideways consolidation, you still need to pay attention to selling into strength and buying into weakness—don’t be greedy.

Sector analysis:

Storage chips: The strongest price-increase logic within big-tech. In the second quarter, memory chip makers like Samsung and Hynix are expected to keep raising prices by more than 50%, and the market has been in a continuous shortage.

Many institutions also believe that storage chips have shifted from a cyclical industry to a growth-oriented industry. For this sector, I’ve been bullish. Combined with today’s Monday move—U.S. memory-chip stocks continuing to rise, Seagate Technology breaking to new highs—still, you also need to pay attention to selling into strength and buying back on dips. Don’t be greedy about sector rotation. The fourth quarter is a dense period for earnings releases, and capital will also choose sectors with strong earnings growth during this phase.

AI data centers around the world are already being built at scale. In China, the number of calls to AI large models has already surpassed the 140 trillion level. Behind these 140 trillion in data is the fact that AI, like water and electricity, has become an indispensable basic infrastructure in our production and daily life. And at present, the scarcest hardware in the entire AI ecosystem is memory chips—without exception. The shortage situation will continue into 2028, while downstream products are still continuously seeing price hikes, with the lowest increase starting at 50%.

Micro LED (micro light-emitting diodes): a technology viewed as the “next-generation mainstream display technology” after LCD and OLED. It makes the LED structure thin-film, miniaturized, and arrayed, so that each pixel can emit light independently. Put simply, you can imagine it as a screen made of countless grains of “sand of light” (micron-level LED chips) even finer than hair. Each “grain” is a pixel that can act as an independent switch and independently emit light. This technology is not only reshaping our visual experience, but also, amid the explosion of AI computing power, is becoming a key role in solving the bottleneck of high-speed data transmission.

1. In the future, widely used in display screens, high-end commercial large screens, smart wearables, AR/VR devices, and in-vehicle displays.
2. The “optical communications express” of AI computing: besides display use, Micro LED also shows disruptive potential in the optical communications field, especially for high-speed interconnects inside AI data centers. Solving the dilemma of “optical vs. copper”: traditional copper cabling has a short transmission distance, and traditional optical modules have high power consumption. Micro LED optical modules, leveraging the innovative “Wide and Slow (WaS)” architecture, achieve all three at once: long-distance, low power consumption, and high reliability. Applicable to glass substrates (another approach to replace CPO packaging). Currently, Micro LED optical communication solutions mainly suit short-range interconnects within 50 meters—for example, connections inside AI server racks or between adjacent rack GPU clusters—to meet demands for ultra-high data rates of 1.6T/3.2T and above.
3. The whole sector already saw a small hype “burst” earlier on, and it may also be one of the directions for heat trading—though it’s trading expectations.

Pharmaceuticals: The sector still has the potential for high consecutive limit-up moves for leading stocks, but the sector split severely last Friday, and going forward I still expect continued differentiation.

Electric power: It still needs to keep consolidating—there should be a second wave around June.

Commercial aerospace: After early May, whether to continue a push depends on how things develop.

Humanoid robots: For now, patience is still needed. Personal advice, for reference only.