[Red Envelope] In-depth analysis of the recent short-term market ecosystem! Whether the trend can improve depends entirely on its performance!

Hi everyone, I’m Xiao Xin. Follow me, and we’ll go after the leadership. If there’s a leader in the market that I didn’t comment on, I’ll unfollow you directly![Taoguba]

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1. Recap of pre-market thinking**

Recently, the market has had serious problems. It’s not just that the index is struggling to move up; whether the index is up or down, it’s extremely hard to make money on short-term trades. If you can avoid losses, that’s already difficult.
For the short-term trading profit effect, we can refer to the Tonghuashun Hot Stock Index:

This index tracks the combined performance of the top 50 popular stocks on Tonghuashun’s popularity ranking. In a normal ecosystem, the next day’s hot stocks typically have expectations of high premium. So short-term trading is basically centered around hot stocks. From the chart above, the hot stock index rarely pulls back. It either ramps up or goes sideways. If there is a pullback, it usually means the market sentiment is in a withdrawal/decline phase.
But after January 13, the day when commercial aerospace saw a decline in hype, the hot stock index has remained in a downward trend for more than two months. It has seen a big drop—this is the first time in recent years it has fallen so sharply. Especially in the past two weeks, the index has already bottomed and gone sideways, but the hot stock index is still in a downtrend. This is extremely serious!
What does this mean? It means there’s a huge problem with the short-term ecosystem! It’s even fair to say the recent market is “targeting and killing” hot stocks specifically. There’s reason to suspect that quant systems are setting up relevant factors targeting hot stocks: as long as hot stocks rise, they get sold down. Then they reverse and lift stocks that have no following or momentum. The result is that the market can’t break out to a leader, and can’t establish the main theme line. In this kind of environment, it’s very hard for retail traders to make money on short-term trades. An individual can’t fight the broader environment.

Take yesterday as an example. With overseas positives boosting sentiment, the index opened sharply higher and the market saw broad gains, but the hot stock index dropped by nearly 2 points. Which stocks were down? Popular stocks like Huadian Liaoning, Xinneng Taishan, and Guangxi Energy hit limit down. Popular stocks such as CITIC Group, Huadian Energy, Rongjie Shares, Rising Technology, and Pingtan Development fell sharply. Popular stocks including Demingli, Anhui Construction Engineering, and Shenzhou High-Speed Rail blew up and turned green. In a broad-gain market like yesterday, the blow-off rate was actually as high as 40%. Demingli’s earnings surged; after a one-word board was smashed into the green, it continued to fall today. Ahead of the market, the high-speed rail projects along the Yangtze River had a big catalyst, but Shenzhou High-Speed Rail and Anhui Construction Engineering both had a one-word board and a “seconds-to-board” setup, and the results were both blown and turned green, causing that theme to basically go out like a light. Ahead of the market, there was also hype around Zhangxue Locomotive & Rolling Stock, and the core stock Hongchang Technology opened high but then weakened and fell again today. The pharma sector performed relatively well yesterday, but the highest-popularity stock, MinoV, still just shook below water all day. After retail traders were disappointed and cut losses with tears, it hit the board today. Rongjie Shares, which had been a trend leader for lithium batteries a few days earlier with very high heat, then fell for three straight days, broke below the 5-day line, and once retail traders exited, today it wasn’t on the hot list anymore—so it got pulled up.

Once a stock gets hot, it seems to become a “sin” that causes it to get smashed. Continuous declines become the norm. After retail traders finally can’t take it and cut losses, they come back and pull it up again. For example, in the past few days, Huadian Liaoning has been falling day after day—because its heat is still high, there are still too many retail traders debating and trading inside. But if you cut your losses, when the heat fades, it might pull up and form a rebound board.

So how should we deal with a market like this? I think there’s only one way to respond: wait. Wait until the ecosystem is normal before doing anything. We make money by trading hot stocks. If the hot stock index keeps falling and the market is specifically killing hot stocks, what other options do we have besides waiting? We can’t go buy neglected stocks and wait a year and a half just hoping that one day they’ll move.
I hope everyone understands this: it’s normal that you can’t make money during this period. It’s not your problem—it’s the market ecosystem that’s broken. If you really have to say what’s wrong with you, it’s that you couldn’t manage to stay in full cash.

2. Leader trade breakdown
Shenjian Shares: I bought it with a small red balance yesterday, and today I’m holding with a bigger outlook.

Trading logic:
As the most popular stock in the past few days, with the highest cohesion and the greatest hope of breaking through, of course it needed support. Yesterday, the buy-in that rushed the board got hit when it dashed into another rise in Technology. Today, the rushing buy-ins again got sold into another rise in Technology. It basically forced this breakout/leadership fire to go out. And my “hold with a bigger outlook” is the greatest respect I can show it! In the short-term ecosystem, the leader needs to be protected. If everyone thinks about smashing the board and smashing the leader out, how could the ecosystem get better? If the ecosystem is bad, how can you make money? Even if I lose money and exit tomorrow, I won’t have any complaints. Of course, this is just my personal respect toward the leader. After the market opens with a big surge, I still told everyone in the follow-up posts right away that if they need to reduce, they should reduce.
Can this “Shenjian” pierce through this chaotic dark night? I don’t know. But I’m willing to put in my part of the effort. If this “Shenjian” fails, there will be the next one. There will always be a big leader that pierces through the darkness. And in the process of searching for that big leader, I won’t give up.

3. Three-Part Quest for the Leader
(1) Analyzing from the emotions (sentiment) cycle:
With the power sector’s hype fading, the index’s “feet hit the ground,” and the sentiment cycle returns to a chaotic stage.
We’re still in the window of switching between old and new cycles. The old cycle (power) is fading, but the new cycle is still unclear. Themes still need to compete for dominance in the main line position.
(2) Analyzing from theme-driven trading:
In the Monday recap post, it was clearly said that the power sector hype had completely ended. But many classmates still felt that, since there was a counterattack on Tuesday, okay, even if I explained in detail on Monday that Huadian Liaoning, as a follow-up leader, couldn’t escape the fate of “killing the A-kill.” Looking at my analysis of power on Tuesday:

Commercial aerospace also failed to break out. On Tuesday it surged and then fell back. On Wednesday there wasn’t any rotation back; it continued to diverge. Today it performed even worse. Perhaps after three consecutive days of divergence, tomorrow, when there are expectations of divergence in the pharma sector, it might rotate back. But there’s no expectation that it becomes the main line.
The better sustained continuity these days has been in pharma. Why did the market choose pharma? There aren’t that many logical reasons. It’s simply because fewer retail traders are going there. Once the heat rises and retail traders all rush in, then the selling will come again.
(3) Analyzing from individual stocks themselves
The pharma sentiment leader is JinYao Pharmaceutical, which hasn’t yet gone through the test of a breakout-sized volume divergence; the trend leader is WanBangDe, which will face suppression from unusual price movements tomorrow.

4. Commentary on core individual stocks

1. JinYao Pharmaceutical: 5 straight limit-ups, the highest board in the market, the pharma sentiment leader.
   After Liaoning, the market’s consecutive board space has been capped by the 5-board limit. JinYao Pharmaceutical’s jump from 5 to 6 will be a huge hurdle. The stock has accelerated for two consecutive days without going through sufficient turnover—especially today’s one-word board upgrade. Profit-taking pressure is heavy. Based on these two reasons, tomorrow’s expectation is for major divergence; it’s better to watch from the sidelines. Tomorrow will be the key battle for whether it can evolve into a leader.

2. ShenJian Shares: commercial aerospace leader
   After 4 consecutive boards, it broke the board. But even after that, the past two days have both closed as red K candles. In such a bad market, it still maintained a red closing candle—this is very good. Even with a two-day break in boards, it’s still the king of popularity in the market. The divergence over these two days is relatively large because there’s pressure at the previous high that needs to release the sell pressure. After these two days of breakout volume turnover, it’s basically already released. So tomorrow’s performance is crucial. If it still wants to go higher, tomorrow will need a strong statement; it can’t have such big divergence again.

3. WanBangDe: pharma trend leader
   In a silent fashion, it has been surging for 8 straight days, nearly doubling. Tomorrow, a rise of more than 5 lines will trigger severe unusual-movement suppression. Because the float is a bit larger, it can’t just push straight up; it must go around (work the route differently). Combined with tomorrow’s major divergence expectations for JinYao Pharmaceutical, WanBangDe’s expectations tomorrow should be adjusted. If pharma can still rotate back next Monday after a strong divergence tomorrow, then it may be worth considering a low buy of WanBangDe.

4. Far Sheng: rumor of a backdoor listing
   Tomorrow is the last trading day for a 200% unusual-movement window. If it rises by more than 1 point, it will trigger unusual movement. With the situation already basically clear, it’s known that it will “go around” the unusual-movement threshold. As for whether it will come into realization/fulfillment (cash-out) after going around, no one knows. Without theme effects, a stock with an independent trading trajectory like this is not easy to gauge.

5. Xinneng Taishan: 8 days, 6 boards, power
   This week, power’s hype is fading, but Xinneng Taishan can keep its ground and hold sideways—this is the “land-clearing hardship” (dou di jie): resisting block-level divergence. If power comes again with another wave, Xinneng could easily get another wave too. The late-session opening auction shows some early run-up, and tomorrow’s divergence expectations will still be very big. On the龙虎榜, the Foshan big boss dominates the show. After Foshan finishes selling and the “blessing lights” are on, it might be even better.

5. Market commentary
Yesterday, the index moved upward to fill the gap, but because volume never kept up, it adjusted back down today. During the day, it even dropped to 3900 points. Luckily, it managed to hold on—continuing the tug-of-war around 3900 points, continuing box-range consolidation. If you want to break out above the box range, you must increase volume. 2.5 trillion is better; otherwise it should be seen as a fake-out.

In terms of sentiment, it’s still very bad: a 40% blow-up rate, which is unfriendly to board-trading players. When will sentiment improve? It still depends on power stopping its downtrend. Today, Huadian Energy and Guangxi Energy continue to hit limit down. Yuen Holdings, Shennan Electric A, JinKai Xinneng, Zhongnan Culture, and other power-identifiable stocks are all pressing toward limit down. This proves that power has not stopped falling yet. We need to wait for clear “stop-the-fall” signals from Yuen Holdings, Huadian Liaoning, and Huadian Energy—meaning continuous small red K candles stopping the decline at key positions—then we can say power has bottomed. And only then might there truly be a new main line, and the行情 can truly improve!

That’s all for today! Thanks to everyone for your recognition and support!
Thanks to @午夜梦回红牌龙 for the “oil-pushing” (support)!
Thanks to @小丑佛洛拉依德 @大宏学股 @小龙啊啊 @轩辕馥郁的小跟班 @艾乐比 @冬藏2022 @道为盗 @健康奔跑 @东湖阿甘 @石中玉2020 @表哥低吸 and other friends for your rewards!
If you have any questions, feel free to discuss in the comments section!
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