It's understandable but still unexpected

Good afternoon, everyone. It’s been over a week since the New Year, and the market has been full of twists and turns, with both joys and tears. Unexpected trends have been emerging constantly. Today, Sister Yao will briefly review the market situation and summarize its current characteristics, then share some expectations for next week. [Taogu Ba]

1. Weekly Market Summary and Trading Strategy Review

In the past week, the most prominent feature has been that quantitative trading rules the market, giving decisive pricing power to algorithms. The major event last weekend was the escalation of tensions related to Iran, which caused a stir in the market. Oil and gas sectors benefited the most, with the sector hitting the daily limit up at the open on the first two days, then continuing to hit the limit up the next day. When traders expected divergence on the third day, the market opened sharply lower. This reflects the difficulty of random trading driven by algorithms—buying at high levels, with uncertain exits the next day. For example, in the optoelectronics sector, there were moments when a dozen stocks hit 20cm limit ups within minutes of opening, but by Friday, aside from one stock with a one-word limit up, others opened lower with heavy selling. This disorderly pattern indicates abnormal trading conditions—some traders anticipate moves in advance, and smart money often gets ahead of others. Ultimately, the market shows that a single day of strength cannot be sustained, leading to half-day trading.

Given this situation, I recommend everyone avoid participating in panic buying driven by news releases. If the market shows no reaction after news, it may be a sign that a collective effort will push prices higher later. If there’s immediate buying on news, the market’s expectations are already priced in, and quantitative algorithms will push the market higher at open, with no one to follow the next day, leading to mindless selling.

Last week, Sister Yao mostly stayed out of thematic trading and focused on core market sectors. I did participate in a gas-related stock, which resulted in a small negative feedback.

Trading Strategy Review:

1. Yanjiang Co., Ltd.: Trend is king, with a unique market logic.

Yanjiang is currently the strongest trend on the ChiNext board. Its theme isn’t closely related to market hotspots, but its independent movement makes it stand out amid the current speculative environment. When the second wave started, I suggested entering. On Tuesday, due to aggressive buying, the stock approached 17 and above, so I took profits. After confirming a pullback, I re-entered near the water surface on Friday. Essentially, this is a trend-based main upward movement or a well-known swing pattern. The key point is that after breaking out, if it doesn’t form a double top, a pullback to the five-day moving average is a good entry point.

2. Continuous Board Gold Rush

The trading logic of Farsen and Yasheng Group has been limited recently, with market enthusiasm not rising much. However, Yueneng Holding, after hitting seven consecutive limit-ups and then being hit hard, still showed positive feedback. This suggests that stocks with similar patterns in the afternoon might have a rebound potential. Therefore, I focused on Farsen and Yasheng Group when they diverged, and both hit the limit-up the next day. This is a viable approach now, but note that the stocks involved should be core small sectors. For example, Yasheng Group is a core player in agriculture, and Farsen is a high-flyer in optical fibers. Meanwhile, the power giant Yueneng Holding’s smaller subsidiary, Ganneng, didn’t get a rebound. When choosing stocks for early entry, focus on the main targets within the sector; if the sector is large, don’t chase the smaller ones.

2. Brief Market and Strategy Recap

Regarding the overall market, there’s no major risk now, mainly fluctuating around 4100 points. A slight dip might occur, but buying on dips and support funds won’t be scarce. Essentially, it’s a sideways trend. Watch the volume—currently around 2.5 trillion yuan. If it drops to about 2 trillion, trading will become more difficult.

In terms of themes, rotation has been ongoing since the New Year. Oil and gas sectors remain hot over the weekend, but with quantitative trading dominant, a high open isn’t necessarily good. If a strong rally occurs on Monday, follow the momentum; if not, consider selling the next day. After a peak, look for opportunities to re-enter, but be aware that divergence might cause a sharp decline by the second day’s close.

There are no other major themes; oil and gas are unavoidable. The key is to buy within comfortable zones, avoiding chasing limit-ups blindly. Focus on stocks near the limit-up area, and leave uncertain moves to smart funds that anticipate the market. If they get ahead and sell early, it’s a different scene altogether.

In terms of sentiment, the market isn’t very high right now. But if a stock is related to core themes or has good recognition, and if it breaks off temporarily, it can be a good opportunity for underwater accumulation or early entry. Avoid stocks with very small market caps, like those around 2-3 billion yuan, as they tend to get caught in the third-board stocks.

That’s all for the weekend. Wishing everyone explosive gains next week!