April 7 Simple Review

Let’s briefly review and recap, [Taoguba]

I. About the index
Based on the chart structure and the current sluggish trading volume, in my personal view, we need a second pullback. And if volume stays around 1.6 trillion yuan consistently, I also personally expect the 3800 level to break through again. Today, it’s normal to keep seeing a mid-sized bearish candle and a pullback.

But in the early morning, news was released about a temporary ceasefire for two weeks. All three parties officially published the news. This is the first relatively certain ceasefire message since the war began. Also, overseas crude oil has fallen sharply; US stocks turned from down to up. In the morning, I expect Japan and South Korea to likely rebound strongly, and then A-shares should also rebound. So, at the moment, index concerns over these two days shouldn’t be big. This is also the first material positive development in the news since the war started.

However, if trading volume cannot gradually recover to the daily average of 2 trillion yuan, then here we should still treat it as an oversold rebound. It’s just that this rebound may have some continuity because the easing of the overseas conflict provides some persistence. But personally, I still don’t see it turning around. The rebound strength and volume of these two days are especially important. In my personal view, for most sectors, the rebound over these 2–3 days is still a sell signal. I don’t see a reversal unless both sides have steps to step down. Otherwise, it’s hard for them to stop; they can only keep fighting—especially Persia. The worse it gets, the more they have to strike.

The Persian military and political leadership was wiped out in a round, their military capabilities were destroyed by more than half, the economy collapsed, and there were disasters for civilian life, and so on. Over the past month, Persia has almost paid the price of losing the country. Their economy has at least been set back by 10+ years, and post-war reconstruction will take 10+ years as well. So for Persia, a ceasefire without guarantees is meaningless. Persia’s demands must include at least a complete end to the war, the lifting of sanctions, and recognition of its right to control the Strait of Hormuz. Otherwise, any such talks are equivalent to surrender for Persia; national dignity would be gone. And of course, this is my personal view. I believe: they fought for 40 days and paid a price at the level of losing the country. If what they get in return is still US forces in the Middle East, sanctions still in place, and their nuclear capability rendered ineffective, then the confidence of the Persian nation will collapse. Conversely, for the US to accept Persia’s demands now is also very difficult. So at present, it’s only a targeted ceasefire. Everyone needs to prepare in case they accidentally start fighting again. After all, Chuanzi’s credibility is already gone. But for now, due to domestic anti-war sentiment, wrongdoing-driven inflation, midterm elections, insufficient ammunition stockpiles, and so on, they temporarily can’t continue large-scale strikes.

II. Sector direction.
Right now there are three directions:

One is defensive / risk-hedging medicine,
one is the tech-light sector,
and one is the XindoDuo concept sector.

For the medicine sector,
it’s the emotion relay that comes after the previous power/electricity direction. The front-runners’ price action is also mimicking the electricity front-runners. At the moment, the “three medicine kings” are Menouhua, Wanbangde, and Jinzhou Pharmaceutical Industry. The走势 (trend) is basically mimicking the previous power/electricity “three kings”: Yujian Holdings, Huadian Energy, and Huadian Liaoning Energy. But it’s clear that the sentiment fermentation in medicine is far weaker than in electricity. Also, after the power/electricity “three kings” reached this stage, within two days the sector started to see a board-wide selloff (sector A-kill). So here, everyone should also take note.

As for the latecomer “catch-up” direction, personally I don’t recommend searching for late-stage laggards within medicine to catch up. I think the probability is not high. If we take today as the reference point, yesterday’s first boards should see another round of emotional “follow-through” and catch-up rotation. The strongest yesterday was the chemical industry direction. But the chemical sector is directly related to the war. If the market is trading the ceasefire expectation, then chemicals may not be able to break out. So be cautious about taking up chemicals today.

For the tech-light direction,
tech is skewing toward the earnings/performance line. Previously it was storage; now it’s the light sector taking over from storage. Falsheng is, after commercial aerospace, the first stock that appeared with a sudden “abnormal move” that got group attention. In the light sector—especially the fiber-optic branch—this is basically a clear “ming card,” not something good to chase higher. You can only buy on pullbacks (low absorption). The light sector also accelerated a bit yesterday. Here, I don’t recommend chasing. Just buy on dips.

For the Duoduo direction,
this is the first time a sector has appeared named after a person. Previously, Teacher Xiaoqiun didn’t name any sector after a person, so it’s a matter of everyone’s faith—nothing much to say. Analysis is meaningless.

III. Sentiment direction.
At the moment, the key high-position front-runners are all group trading (bargaining/holding together). Basically there are three directions: defensive medicine, the light of tech, and the Duoduo concept. Today, overseas released a relatively clear calming message for the first time. If the broader market rebounds today, we need to see whether these front-runner group-trades loosen and disintegrate. These front-runners are only suitable for watching; they’re not suitable to chase and relay again. Watch whether a new direction appears in the market today. Everyone should focus on yesterday’s first boards and today’s first boards. Previously, the front-runner group-trades in each direction might still keep going, but the risk-reward (value) isn’t great. For the mid-position stocks in those directions, once the market takes today as the node and trades the ceasefire expectation, those mid-position names will likely be directly abandoned.

Quick summary:

For the index, this week should be fine. It should be the rebound everyone has been waiting for. But for most stocks, in my personal view, even the rebound is still a sell signal.

For sectors: medicine, light, and the Duoduo concept—personally, I don’t suggest going in again. If the market truly takes today as the node, these three directions, especially the mid-position stocks, are very likely to be abandoned by capital.

For sentiment: the most important thing right now is to observe whether the front-runner group-trading is moving with the index (in line) or against it (out of sync). Then, personally, I lean toward a new round of low-position “catch-up” emotional relay. It should mimic electricity and medicine again.