February 24 Review - An Underwhelming Start to the Year

Let’s do a simple recap. Today, the index opened strong, but the overall market didn’t meet expectations. For many investors, positions held before the holiday were mostly cashed out today. Stocks that performed well today, such as fiber optics, non-ferrous metals, oil, electronics, and power, were all sectors that experienced significant declines before the holiday. Many friends either held no positions or very few.

Yesterday, I told everyone about the direction of fermentation during the holiday and that most holdings before the holiday were expected to be cashed out. The volume at the 4100-point level was only 2.2 trillion yuan, which is very low. To compare, at 3500 points, the volume was around 1.7-1.8 trillion yuan. So, at this level, the index’s overall significance is limited unless it exceeds 2.5 trillion.

The entire market is still expected to fluctuate and rotate. Based on current conditions, there probably won’t be a strong, sustained main trend in the first quarter. So, everyone should avoid chasing highs. Most of the strong stocks today are likely to see adjustments tomorrow or the day after.

Apart from a few local stocks showing some persistence, most of the recent gains are from oversold stocks. You can see that most of today’s rising stocks, except for a handful, are oversold. These are not sustainable. Tomorrow, a new batch will rise, and the day after, another. So, avoid chasing high. For example, today’s oil, electronics, fiber optics, optical modules, and power stocks—if you didn’t buy early, it’s not suitable to chase tomorrow. If you still believe in them, wait for a correction in the next couple of days to buy on dips. (For instance, Longfei Fiber’s breakdown at the close suggests a correction is coming tomorrow.)

Regarding other sectors like AI applications, do you still remember what I said before the holiday? I mentioned that the outlook wasn’t promising because the AI application sector was already adjusting when Zheng Yue’s three-board stock opened with a 20 billion yuan overnight order. Big players like Zhongjun, Guangbiao, and Lio didn’t move, so expectations for AI applications are low. Think about it: Zheng Yue can’t move the market, Zhongjun’s stock isn’t rising, and Lio isn’t either. Even if there’s a rebound, it’s more of a selling point. Before the holiday, on the second last day, Guangbiao and Lio rose, but I told you then that their rise wasn’t the start of a trend but a trap. Do you still remember?

As for robots, I’ve never been optimistic about their ability to sustain a trend now or in the future. When will maintenance costs drop by 50% or when will robots start thinking independently and replace humans? Currently, robots are still just for show and promotional purposes. Personally, I don’t expect robots to have a sustained trend in the first half of the year. The same goes for AI applications, including commercial aerospace, which also had low expectations in the first half. Many people still hold these stocks, but when the market turns, it’s time to sell—don’t hesitate.

Today’s rising sectors—oil, chemicals, non-ferrous metals, fiber optics, communications, power tokens, and computing power—are all sectors with rising prices driven by institutional trends. So, focus on these price-increasing sectors in the first quarter. Avoid short-term speculative trades. The current environment suppresses short-term themes, which lack height. If you chase short-term themes without quick entry and exit, the retracement can be severe. Plus, quantitative strategies are also shifting. Many stocks that rise through quant rotation experience deep corrections afterward. For example, Chinese Online was asked about today. Therefore, I advise against chasing short-term hot stocks now. Focus only on institutional-driven sectors with upward momentum.

However, the price-increasing sectors are broad concepts involving multiple industries, such as non-ferrous metals, chemicals, oil, semiconductors, and computing power. Each industry has many sub-sectors, making the total number of stocks involved quite large—probably hundreds or more. With limited volume, it’s impossible to focus on all at once. Instead, there will be internal rotation and segmentation. Never chase high. Once a sector’s trend is established, don’t chase the strongest stocks; instead, buy on dips during corrections of 1-3 days, and sell when the sector resumes rising. Don’t follow subjective patterns—they’re meaningless. Stocks outside the price-increasing sectors are mostly for selling on rebounds.

Since there are so many sectors and sub-sectors involved in the price-increasing trend—dozens of sub-areas—how do you choose? Most people are ordinary investors. Don’t expect to grasp all the internal rotations within these sectors. My personal suggestion is to pick 1-2 sectors, then select about 3 sub-sectors within each, and 2-3 stocks within each sub-sector. That gives you around a dozen stocks. Trade these stocks by buying low and selling high. Ignore the rest. There are too many sub-sectors, and it’s impossible to follow all. Don’t chase after stocks just because they rise; often, chasing leads to adjustments and losses when they start to decline.