April 7th, a day of rebound: opportunities and hidden concerns in the market

Since I kept emphasizing repeatedly on Friday that this was the two-way ice point, I don’t know whether any of you fans made money.[Taoguba]
Last Friday, when it was at the ice point—if you went to pick up inventory, the probability of making money today should be based on the ratio of limit-up to limit-down. You should have a more than 75% chance of making money. Unless the underlying you picked is really worrying.

** In a situation like this where the market is overheating, it’s actually not a good thing—it already happened once last Wednesday. It was one day in the ICU, one day in KTV.** If fans who know how to think a little, they would also see it clearly. This kind of phenomenon keeps happening. Especially when the index is moving within a box. Otherwise, last Friday, I wouldn’t have said so confidently that today’s position is the ice point, and opened a new thread specifically to remind everyone to be ready to pick up inventory.** Think back to last Wednesday—there was a day of broad market upswings; then by Thursday, only the pharma sector was left as the surviving main storyline. **

Some people saw how upbeat the atmosphere on today’s chart is—the environment is good—and, just because they were happy, they drank two bottles of whiskey, and then they started getting carried away again. When they see some sectors going up, they feel like it’s time to chase the highs again.** I don’t recommend most people go and chase the highs**;** I recommend that the vast majority of people do what I said—take the beating and stand at attention. Because that pattern is relatively easier to make money.**
Of course, I’m the one who chases the highs a lot. Because chasing the highs is one of the operating patterns I use.
I rarely do low-position stocks. Because low-position stocks have the shortcomings of low-position stocks. Take the first-limit-up stock from Friday as an example: at the open today, in reality many stocks still had a premium. But because the trading volume wasn’t enough, and then in the afternoon it fell back. If you’re greedy, you see the market look so good and imagine it will still give you another limit-up—that’s greed. I think many fans probably were still in profit this morning, and then as it slowly fell back toward the afternoon, they ended up losing money.** This is what I often say: stocks at low positions don’t have enough certainty. (Thanks—you can look at the first-limit-up stocks from Friday; how many actually survived? Even with today’s market environment being very good, it ate the premium that came from the ice point shifting toward repair and the reverse push.)**

Also, many people don’t know why they just like to trade first-limit-up stocks. The uncertainty of a first-limit-up is extremely high. Personally, I rarely see people who seriously and properly execute first-limit-ups. Given the current market’s volume and price-rotation perspective,** if you repeatedly look across the whole market, you’ll find that the success rate of the “one to two” stocks is relatively low.** And in a rotation market, there are often cases where a certain sector suddenly surges—then on the next day it gets wiped out by the crowd. This kind of uncertainty is exactly why I’m unwilling to do first-limit-ups. Of course, now I’m also testing another mode for doing first-limit-ups. But its logic is too special. It was inspired by Greatech/Changfei Optoelectronics, and this isn’t within what ordinary people can understand.

But has anyone ever asked what the benefits of high-position stocks are? The biggest advantage of high-position stocks is—you can see it today with Farsight Wins/FA尔胜. It hit the limit-up without any hesitation at all.** That’s because within the “battling-for-group” stocks, it’s in a very core position.** And who gave it that position? Regulators did.
Another advantage, honestly, is the simplest: its advertising/visibility effect is good. Sometimes you may not understand why a sector can repeatedly move upward, because it has a “highest leader” pulling the sector up. So the highest leader will always be the last one in the sector to fall. Otherwise, the sentiment of the whole market would collapse. From this timing rhythm, even if there are quantitative factors, high-lead stocks—do not affect it much. Because large capital needs them to maintain the sector’s heat. So when building the highest leader, large capital itself often ends up losing money.
For the funds currently doing theme/sector-type trades, they don’t rely on these high-position stocks to make money. They make money by spreading out across the sector, pushing the whole sector upward, and earning the gains.

I mentioned some thoughts about high-position stocks versus low-position stocks. Of course, what I said is all about the logic of sentiment-type stocks. And some fans will also ask about all kinds of random stocks. Actually, in my view, there are very few stocks in the entire stock market that are genuinely worth trading. I’ve said this before—most people just don’t understand it. I’m repeating it here again.

1. ** How do you make sure that among more than 5,000 stocks, others can find the one you’re holding?**
   2. How do you make sure that after you buy, someone comes to take the bag for you tomorrow or the day after?
   So every time you buy a stock, you shouldn’t care about the candlestick chart. And you shouldn’t care about patterns. First answer the two questions above. Then you’ll know why your stock keeps drifting lower for a long time and no one takes the bag—because it has no trading value.

Some fans here still managed to eat a lot of meat. It’s good when you have a broad range of people. But don’t envy those who ate the meat—because when your chunk of meat is eaten in an unclear, unexplained way, one day you’ll have to give it back. That’s just a normal market: everyone can only eat the portion of meat that they understand, and that’s very normal and very reasonable distribution. If it exceeds that, it’s very likely you’ll lose money.

Today’s market, to put it simply, is simple; to put it more complexly, it’s complex. Let’s flip it and talk it out step by step. I already posted earlier the overall situation of market sentiment. In reality, what everyone should care about most is that the trading volume will keep compressing further. There will be risks here. Last Wednesday also had the same situation. So on Thursday, there was massive selloff. Of course, I don’t think there will be a very severe index-type decline here. But looking at where the market is heading today—so many sectors moved out—which sectors will receive capital attention tomorrow?

 Someone told me today that the chemical sector is rising across the board. I really doubt it. Let me talk about one reason I’ve never really looked favorably on the chemical sector—because its deep underlying logic has problems. Over this period, the chemical sector has been up and down from March until now. The most core principle is that it’s supposed to raise prices. The reason for the price hikes is because of the situation in the Middle East. After prices rise, then its performance should be off the charts. Under these circumstances, its short-term earnings reports might indeed be possible. Because international oil prices have already gone up, but domestic chemical companies’ inventories are still from before. So they sell their earlier inventory using the current higher prices. Then, of course, the financial statements look bright. **But here I’ll point out a deeper issue: has the structure of industrial profits changed? Because in the future when it buys supplies, the oil price will already be higher, so the cost of overall chemical raw materials will also rise. So for chemical companies, the profit margin doesn’t actually change—because its corresponding raw-material costs have also risen significantly. This is exactly why I’ve kept not looking favorably at it.**  

**There are three sectors I’m paying relatively more attention to: **
Optical communications: strong players are everywhere in this sector!

Biopharma/pharma: this sector is gradually becoming extremely lonely, but the highest-lead by sentiment is in this sector. So it can’t fall yet!

Also, another core leader should be added here: Wanbangde;

Chips: today the chip sector started to have a bit of unusual movement—it isn’t random. How do I judge this point? The simplest way is that those stocks with market caps in the trillions of yuan have started moving. If it were just doing an ordinary rotation angle, it wouldn’t need to put in that much money. So today’s unusual movement must be meaningful. Everyone should pay more attention to the targets in this sector going forward.
And when trading stocks in this sector, take a good look at those large-cap stocks. Especially those who love playing swings—when these days they just started up this sector, is it not worth paying more attention to them?

After all those pointless data, we should pull back and talk about today’s overall market direction. If I’m wrong about anything, you can correct me in the comment section. Because having different views on the market is a good thing.

In today’s early session this morning—actually right at the open—the optical communications sector showed a bit of weakness. But **Huiyuan Communications, Xineng Taishan, and Farsight Wins followed suit and then had strong limit-up boards, which pulled back some of the optical communications funds**. From these names, doesn’t it show that this sector is very strong? Actually, it’s still not certain.  

Also, looking the other way: **this morning, Changfei Optic Fiber, Dongshan Precision, and Xin Yi Sheng—these core stocks of big funds—already started moving into adjustment.** They didn’t follow the upward moves of those sentiment-driven stocks. This shows one point: in terms of sentiment, **those optical communications stocks may be headed toward a “group/consensus” logic, breaking away from their original sector attribute logic.**  

At the same time, **the pharma sector’s performance at the open was actually just so-so.** Although the highest leader, **Jinzhou Pharmaceutical Industry, opened and capped with a limit-up, but the order queue wasn’t enough.** Strictly speaking, in my view it must open today—to create a disagreement, and then return to cap is a reasonable state. I saw another phenomenon in the market: large institutional stocks—such as PharmaMew/Medicine Tom/Kang—came up from below the line; there was a pullback in the afternoon, but throughout the whole day it stayed above the moving average. Pharma didn’t start flowing back until around 10:00 in the morning, showing some sector effect. Some low-position stocks began to get limit-up one after another. At the same time, mid-position stocks that had been stuck on previous days without limits began to be rescued up from below. The two most typical examples are: **Double-White/Bailu Pharmaceutical and Chongyao Holdings.**  
  But here you’d find that in the afternoon, all kinds of pharma stocks gradually pulled back. **The remaining high-position ones—Jinzhou Pharmaceutical Industry and Wanbangde, these two high leaders—were slowly drifting away from sector logic and starting to act like “group consensus” again.** If you understand it this way, then for the pharma sector today, the “doctors” (pharma) means: you do the highest leader, or you do the first-limit-up; otherwise **all the other mid-position stocks are very likely to be sent out to take the hit.**  

** As for the chip sector, the most worth watching today isn’t those stocks with multiple consecutive limit-ups, and it isn’t the limit-up boards either. It’s Cambricon,** which actually started up today. Of course, you can’t go trade Cambricon. But its starting up is a representative act with symbolic significance. Cambricon itself has too large a top position; if you run over there, when will the top holder above get their release/escape from losses? So you can’t trade that kind of stock. But the key point is that the whole chip sector started to move, and even a large-cap stock like Cambricon began to activate. That proves the chip sector has received approval from large capital, and it will keep appearing repeatedly afterward. Shouldn’t we select the right targets to enter at this kickoff point?

Everyone, take a look. I’ve already laid out clearly the sectors I think might have a certain degree of continuity, along with my understanding and logic. If there are people who do different targets within it, you can match and go take a look. See whether everyone’s understanding is about the same, or whether you have your own different way of viewing and observing. You can leave your logic, and we can discuss it.

**So far, the information we’ve gotten above is: **

1. The index is rising, but with shrinking volume;
2. After the ice point, sentiment is compressed to the extreme, and then many sectors rebound;
3. With insufficient capital volume, there’s a rebound in the early session first, and then it will slowly start to pull back;
4. The market can’t focus on a single core sector, so most sectors in the market can’t have continuity;
5. Because the amount of capital isn’t enough, sector logic can’t move forward, and it turns into “group consensus” logic.

**Using elementary school thinking, we can come up with the following possibilities: **

1. We should understand that tomorrow the index likely won’t just go straight up from this position because the volume isn’t enough. So if it doesn’t go up, it will most likely either move sideways or drift a bit downward, but not crash sharply.
2. At this position, today’s newly rotating sectors don’t necessarily have continuity, so don’t touch them.

**Then the response strategies we can make are: **

1. Since sector logic can’t move, and today isn’t an ice point either, we can only trade the “group consensus” logic. And within the “group consensus” logic, it’s very clear that today’s sentiment consensus will be stronger than the sector’s group consensus.
2. Then we can only trade group-consensus-type stocks, and they must be high-position stocks with very clear visibility/recognition. Otherwise, when other sectors or sentiment fall tomorrow, the market will follow the group-consensus logic. If tomorrow starts to bring in incremental capital, then it can switch to sector logic. No matter which one it is, today’s top sentiment leader will receive tomorrow’s capital recognition.

**So my trades today are as follows: **

1. At the open, I first handled the YunuoPharma I bought on Friday—thanks to the great A for not killing it. From this point you can see that the current quant de-bagging methods are also quite refined.

2. ** Bought another sentiment high leader in the pharma sector: Wanbangde.** The reason he hasn’t been able to hit limit-up these days is because he has to get around the abnormal movement rules. Today, if he rises more than 6.7, he will be banned from unusual trading activity. So watch my performance—and watch the main forces’ performance. (Please understand that I’m masking some parts; otherwise I’d often be judged for violations if I don’t mask them.)

Alright, this is where I should focus and after I’ve focused, brothers and sisters—if there’s anything you still don’t understand, or if you don’t quite understand the logic behind my buying and selling, you can bring it up and we can communicate. I welcome you to watch my recap tomorrow at the same time as well. Thank you.