Rebound repair, the power sector continues to strengthen, maintaining the right rhythm

1. Today’s Market

The major index rose by 1.78%, with 5,112 stocks in the green and 322 in the red. The total trading volume for the day was 2.08 trillion yuan.

Yesterday, the market experienced an epic plunge, dropping 3.63%. Only 269 stocks closed higher. Last night, U.S. stocks surged, and today’s A-shares opened with a rally but then declined before recovering in the late session, ending the day on a positive note overall.

Recent market movements have been volatile with no clear pattern, as both recovery and decline seem similar. After yesterday’s historic drop, there’s a possibility of a rebound. The stock market operates this way: when prices rise too much, they fall; when they fall too much, they rise.

Since last Tuesday, the market has been declining steadily, with few stocks in the green daily. Aside from the electric power sector, other sectors have experienced various declines. Currently, electric power has been strong for six days. Those who focused on electric power last week likely weren’t hurt much. This is why I’ve been emphasizing electric power from last week to today. Whether the market is rising or falling, it’s always a structural market. As I wrote over the weekend, a single-sided rally can support multiple sectors rising simultaneously, and a single-sided decline can also see some sectors strengthening. As investors, we should always align ourselves with the market’s structural trend.

Yesterday’s sharp decline was a good thing, in my opinion. It’s better than a slow, painful decline. A rebound is likely to follow. Today, core electric power stocks like Huadian LiaoNeng hit the seventh limit-up, signaling short-term strength as funds flock to the sector.

Those who experienced the 2018 bear market will remember that, despite daily declines, some stocks like Hengli Industrial hit 14 consecutive limit-ups during the trade war year. Stock picking became easier then. Similarly, in the current decline, aside from electric power, few sectors look promising, making stock selection easier—if you have the awareness that, whether in a bull or bear market, the market is always a structural market. Always align with the market’s dominant trend.

Today, Huadian LiaoNeng and other electric power stocks hit the seventh limit-up, breaking recent resistance levels. The last stock to break such resistance was Yunnan Energy Holdings, which then entered a trend. As a breaker of resistance, Huadian LiaoNeng is unlikely to perform poorly. Those who support the market are like those who bring firewood—they shouldn’t let the market freeze in the wind and rain. The same principle applies.

For now, focus on electric power. Today, several stocks in the sector hit the daily limit-up, including Huadian LiaoNeng, ShaoNeng Shares, Energy Saving Wind Power, Jinkai New Energy, Huayin Electric Power, Huaguang Environmental Energy, Tuori New Energy, and Hunan Development. The market is recovering, and electric power is overall strengthening today, with a normal expectation of further differentiation tomorrow.

After yesterday’s crash, the probability of a quick further decline is low. These days, it’s good to be somewhat proactive and seize the rebound opportunities.

Today, keep an eye on Huadian LiaoNeng and ShaoNeng Shares at low levels. Tomorrow, a higher opening is expected.

2. Stock Comments

3. Huadian LiaoNeng, Electric Power Sector: Today, it hit the seventh limit-up for the first time. It’s a stock that rallied during the market’s big decline, a “grouping” stock. Because the market index has fallen so much recently, Huadian LiaoNeng, as the first to hit seven limit-ups, attracted attention. Recently, stocks that hit five limit-ups have been under pressure, but the continued decline in the market pushed Huadian LiaoNeng to seven. It’s similar to Hengli Industrial in 2018’s bear market or Shenhua Zhonghua A in the first half of 2024—both were “grouping” stocks with a built-in profit effect. When other sectors underperform, these stocks stand out. Whether or not you follow them, the market’s focus is on Huadian LiaoNeng. Keep watching; only a continuous acceleration or a sudden decline will weaken it. Beware of “one-ride” stocks that die when they lose momentum.

4. Yunnan Energy Holdings, Electric Power Sector: As the first strong performer in the sector, it has undergone a full adjustment and now shows signs of a second wave. The overall weak market sentiment and the sector’s relative strength support this. Following the five-day trend line and buying on dips is a good strategy. Participate as a trend stock. Electric power was included in the government work report this year, so the sector is likely to stay strong for a long time. Keep an eye on it.

5. Energy Saving Wind Power and Jinkai New Energy, Electric Power Sector: These two stocks have been consolidating recently and strengthened again today, thanks to the overall sector strength and the five-day trend. Over the past two weeks, those focusing on electric power haven’t been hurt much by the market’s decline. When investing, look at sectors first, then individual stocks. This approach often yields better results. Today, the sector is strong; tomorrow, some differentiation is expected.

6. Tomorrow’s Direction

The focus remains on the electric power sector. The recent sharp decline in the market isn’t ideal, but whether in a bull or bear market, the A-share market is always a structural market. Remember this: choosing the right sector often yields twice the results with half the effort. Conversely, selecting sectors outside electric power might lead you astray.

Tomorrow, continue to focus on electric power. Huadian LiaoNeng is a key stock to watch—its breakout is a market favorite. Even if you’re not paying close attention, include it in your watchlist. Wishing everyone a good rhythm and new highs tomorrow.

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