[Red Envelope] A detailed breakdown of today's market from the perspectives of emotional cycles, themes, and core stocks! Pay attention to the upcoming resistance level at 4020 points!

Hello everyone, I’m Xiaoxin. Follow me, and let’s go catch the market’s leader. If there’s a leader in the market and I didn’t comment on it, then unfollow me directly! [Taoguba]

1. Pre-market thinking recap

External positives—when the index opens high, that’s just the usual routine. Today’s trading volume has shown a clear expansion; basically it has reached the 8B yuan (2.5 trillion) volume threshold I’ve been emphasizing before, which supports the move higher and higher.
As for the medicine sector: it’s just a group trade between Tianjin Pharmaceutical and Wanbangde. It doesn’t count as the main storyline. Quant funds lifted Tianjin Pharmaceutical for low-level arbitrage, which is why you’ve seen consecutive heavyweight single-day losers like RunDu, LianHuan, ChongYao, and so on. In yesterday’s post, I also mentioned that the medical sector has basically been treated as a defensive/hedge sector to be traded during a weak market. And since the market today is expecting broad strength, it’s only natural that the medical sector would fall apart.

As for the DuoDuo concept, I’ll discuss the stocks later.

Although the market is generally strong, I personally stayed on the sidelines and watched for a day. This time I must wait until the new main storyline or a new market leader is confirmed before taking action. My heart is shattered—I’ve always believed that commercial aerospace is a theme you can’t get past when the market is turning around. Because ever since the commercial aerospace hype ended, the market has kept falling into a state of confusion or a pullback. The old saying applies here: if the market wants to recover, commercial aerospace has to get going first. Based on this big direction, I kept watching these stocks in a row: Shunhao, Shenjian, and Zaisheng. Last Wednesday, after I focused on Shenjian, Zaisheng dragged my timing behind; on Friday at the open it couldn’t turn red, so I had no choice but to unfollow. Then I switched to Zaisheng, which adjusted near the 10-day line. But when Zaisheng surged strongly after the afternoon started, it was again dragged by Shenjian. Yesterday, I could only unfollow again at the open. These two picks left me exhausted and I had no energy to trade. Shunhao is too lazy to even mention it—I’m bullish on the big logic of “space computing power,” but every time it hits the daily limit and feels like it’s about to rise, it starts adjusting again. It wore down all my patience. So today, commercial aerospace finally delivered a big bullish breakthrough—precisely killed right before dawn.
From the trades in these stocks, I personally feel that trading still needs to return to pure execution. Don’t keep trading with arbitrage thoughts. When the new main storyline arrives, and when the big leader shows up, then go in with a heavy position and go all-in. That’s why today, even though the market was broadly strong, I didn’t do anything.

2. The Three Parts of Hunting the Dragon
(1) Analyzing from the emotional cycle:
There’s an expectation that the emotional cycle is shifting from the muddled/choppy phase to the primary uptrend phase. The logic is as follows:
Ø Power stocks have stopped falling—this is something I’ve been emphasizing for a long time. As the main theme of the previous cycle, power must stabilize/stop falling before the market can welcome a new cycle. Clearly, power stopped falling yesterday. Shares like Yueneng Holding, Huadian Liaoning Energy, and Huadian Energy didn’t keep dropping yesterday; they couldn’t fall. Even Guangxi Energy, the biggest net short, also couldn’t fall.
In the Thursday post recap, what was said also got market confirmation—power stopped falling, and the market improved!

Ø Today the group trade/“team trading” was dismantled. Weak-group stocks like Tianjin Pharmaceutical, Farisheng, Shuer Sports, and Xinneng Taishan showed relatively large negative follow-up feedback. When weak group trading collapses, it suggests that funds believe the market is about to turn stronger—so the idea that the market is improving is effective. In contrast, on March 24 the market was broadly strong, but Liaoning Energy and Huaneng were still being held up by the group trade going higher. That’s abnormal, indicating that funds didn’t think the market would truly improve after that day—so they kept the group trading on power. The result is obvious: after power group trading ran for two days, extremely negative “money-losing” effects appeared, and the market didn’t truly become better.
The emotional cycle already has the conditions to switch to the primary uptrend. Next, we just need to see whether it can produce the big main storyline!

(2) Analyzing from theme speculation:
From March 26, after power topped out (corresponding to Huadian Liaoning Energy topping), it kept getting sold off all the way down until yesterday it finally stopped falling (corresponding to Huadian Liaoning Energy and Guangxi Energy stopping falling). As the main storyline of the previous cycle, power stopping the fall helps the market welcome the new main storyline.

Medicine kicked off on March 27 (that day had 10 limit-up stocks; Tianjin Pharmaceutical hit its first daily limit rebound in a resonance, while Minerva came before the dragon). On April 3 (last Friday), the first strong divergence occurred (only 4 stocks kept hitting daily limits; Tianjin Pharmaceutical opened its one-price limit with an opening; LianHuan, RunDu, etc. hit limit-down). Yesterday it couldn’t deliver the first divergence-to-repair. Then it can’t become the main storyline, because for a theme to become the main storyline, it needs to experience a strong divergence test. Today, with the market broadly strong, it’s announced as over (corresponding to Tianjin Pharmaceutical ending).

Today, the themes that showed strong resonance were communications, computing power, and AI applications. Every time the market is broadly strong, they basically get pulled—yet they still can’t be confirmed as the new main storyline. I’ll analyze each one:
For computing power and AI applications: today you can only treat them as oversold rebound, and both have already bounced into the dense cluster of left-side positions. The pressure overhead is still heavy if you go higher.

Communications sector—this is hard to analyze from the angle of theme speculation, but if you combine it with the 龙头 (leader) trading cycle, it becomes very clear. The leader, Yangfei Optical Fiber, started consolidating at a high level—meaning it entered a phase of “catch-up gains” (补涨). Today’s communications speculation is similar to the power speculation of March 24. It belongs to the catch-up window, and the catch-up dragon is Huiyuan Communications. In the catch-up phase, the speculation emphasizes being fast and fierce—arrive quickly and run quickly, and it’s fine if you participate in time. But after the climax, if you jump in, it’s easy to get cashed out/locked in. You can anchor to the strength of Huiyuan Communications: if Huiyuan Communications opens its limit up with a strong divergence, then this theme should be considered over.

In summary, I still haven’t seen any theme come out with the expectation to become the main storyline!

(3) Analyzing from the stocks themselves
Yesterday, Tianjin Pharmaceutical had a surge in volume and divergence as it advanced to 7 boards. Today, on a day when the whole market was broadly strong, the “weak-to-strong” failed; it couldn’t pass the test of the high-volume divergence. It couldn’t evolve into a big leader. The reasons for failure: first, the theme effect wasn’t strong. Second, the high-volume divergence only happened at a 7-board high position; for a stock to evolve into a leader, it’s usually more suitable to experience high-volume divergence in the 3-to-5 board range.
Farisheng yesterday bypassed the abnormal trading action and hit a T-shaped one-tick limit-up. But today, pre-market it entered a “pond” (i.e., a limit-up/continuation failure setup). The leader evolution into a “big妖 (demon/chaos leader)” route was cut off due to being “blown off by the black whistle”—just like Yueneng!

4. Commentary on Core Stocks

1. Tianjin Pharmaceutical
   Yesterday it faced the pressure of abnormal trading and still pushed through high-volume divergence to advance to the 7th board. Today, on a day when the market was broadly strong, and with Minerva assisting with a one-price limit order, it weak-to-strong and opened high, instantly hitting a board. It looks very beautiful and “logical,” and it’s a very standard leader buy point—but the issue is that it was too smooth, which is actually a problem. There are three problems: First, medicine is a defensive theme. Last Friday’s strong divergence didn’t resolve/repair yesterday, so basically it was already declared as a “one-wave theme.” Tianjin Pharmaceutical and the theme timing are out of sync. A good rhythm is: high-volume divergence last Friday, and today you don’t fear abnormal trading and you weak-to-strong and advance to the next board, bringing medicine back as a rotation. Second, Minerva’s one-price board has no reference value, because Minerva hit a one-price limit order only because “DuoDuo” was flowing into the stock yesterday. What medicine should reference is the low-position catch-up new leader Tianyao Pharmaceutical. Obviously Tianyao Pharmaceutical’s order size is not enough! Third, Tianjin Pharmaceutical originally belongs to weak group trading. When the market turns stronger today, weak group trading should dissolve—but it still stubbornly pressed with a huge high open. That’s essentially suicide. Even for a strong stock like Liaoning Energy, on March 24—the day of broad market strength—it didn’t dare to open high. Fourth, the high-volume divergence came too late. A high-position high-volume divergence is very hard to withstand. Liaoning Energy and Yueneng both completed high-volume divergence at 5 boards.
   Today it exploded into a sell-off deep in the water and closed with a tombstone line—this is a top-finding K-line for the leader, announcing the end. Tomorrow, if there’s any repair, it’s more likely to become a selling point.

2. Farisheng
   One Farisheng, one Guosheng—I don’t know what people are trading, but the uptrend is just invincible. After “DuoDuo concept” was blown up yesterday, I only then realized it was a DuoDuo-favored stock. DuoDuo puts Guosheng on the left hand and Farisheng on the right hand—fully turned on, launched with a cheat code. Who is DuoDuo? That’s someone even more divine than an emperor! Buy at low levels, hold long term—one stock can multiply many times. Last year’s Zhongyi Da Emperor was DuoDuo’s one-shot coronation. Unfortunately, humans calculate but heaven decides: Farisheng, with a “clear card” that bypassed abnormal trading, was rewarded with a one-word limit order yesterday—but it still got “JG-ed” (processed/screwed by intervention). If it continues to rise, there would be a risk of suspension. As for this stock being a performance-trash ticket: after the performance disclosure this year, it might even be marked with ST! Today it got “blown by the black whistle,” and the path to “becoming a妖” is cut off. Unless it dares to enter a small black room to close up and cultivate, training into a true妖法!

3. Minerva
   Yesterday it was favored by DuoDuo. Today it directly hit a one-word board! It became the shield used for Tianjin Pharmaceutical to distribute shares. Pushing a one-word board like this goes against the stock’s own operating rules, so it will inevitably be punished. Better to observe—don’t force anyone to “worship gods.”

4. Huiyuan Communications
   4 consecutive limit-ups—highest board in the market. It’s Yangfei Optical Fiber’s catch-up dragon. After three consecutive one-word boards, the rest can only be treated as an emotional marker. As a catch-up dragon, the day with strong divergence is the day it tops, which also implies that the optical fiber rally is basically coming to an end. Today communications hit its高潮; tomorrow, Huiyuan still has a one-word expectation. If it doesn’t stay one-word, then pay attention to theme risks.

5. Zhonganke
   3 consecutive limit-ups. In computing power, it stacked up while “riding” the 4.4 death password and pushed the board—indeed impressive. Today’s computing power exploded; tomorrow the high-premium should be without worry. Normally it should be a one-word board; at least it should open above the previous high (4.64) to match expectations. But this stock’s float isn’t small, and it only advanced because it had an advantage in occupying the “position/spot.” If tomorrow it either goes one-word or opens very high, that isn’t a good entry point—beneficial for those holding to manage/dispose their shares.

5. Market Commentary
Today the index surged with large volume and hit around the 6-month moving average line. Long-accumulated market sentiment finally got released. Based on the three major signals of a market bottom yesterday, we already satisfy the first two signals (standing above the 5-day line, and volume/energy reversing). If we can now also see a theme with continuity, then the market can be considered a reversal.
But because today’s rally was too big, it actually overdraws tomorrow’s buying strength. And soon above, it will face new pressure levels. So the next few days will likely be a period of consolidation.
For the upside pressure level, for now look at around 4020 points. This is the pressure formed by last November’s high and the low in February. If you’ve studied K-line theory, you should understand that this level is the neckline of a head-and-shoulders pattern. The index needs to strongly break above 4020 and hold it to break the head-and-shoulders structure.

That’s all for today’s sharing! Thank you everyone for your recognition and support!
Thank you @Wintercang2022 for the tip!
If you have any questions, feel free to discuss them in the comments section!
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