[Red Envelope] Short-term rhythm is king, sentiment ahead of index recovery, perhaps it's the darkest before dawn!

Short-term rhythm is life; rhythm is king. Without grasping the rhythm, no matter how good the overall market index is, you will have no chance. Conversely, if you master the rhythm, even if the index looks bad, short-term performance can still be decent. Sentiment has already started to recover before the index, perhaps it’s the darkness before dawn. A trend reversal should happen within three days! [Taogu Ba]

Last week, the rhythm was quite good. Maintaining stability this week is not easy, especially with the index continuing to stay at freezing point. Short-term trading requires a higher sense of rhythm; otherwise, a small mistake can lead to big losses!
This week, I mainly used three strategies: first, the deep water catch mode, which is suitable in the era of quantitative trading during weak market conditions.
Second, after significant divergence, there is an expectation of recovery the next day. During intraday divergence, stocks that strengthen are the focus. Of course, many can be caught off guard—seeing a strong open and chasing it directly. The key is to identify stocks that strengthen amid divergence, not just high open consistency.
Third, the late-day front-run mode!

On Monday, stocks like Yunnan Energy Control, Shun Na, and others hit the limit down one after another. The market continued to show divergence and loss effects at the open, so strength was limited. GCL-Poly Energy resisted decline stubbornly last Friday; during Monday’s first pullback to the five-day moving average, there was some trading value.
From a hindsight perspective, the deep water low buy on Monday was not a bad idea. The market chose Shun Na as stronger, but GCL-Poly also had good rebound opportunities every day!

On Tuesday, after a high pullback, the market kept falling until the close. That day, I couldn’t focus on new opportunities and just passively defended for the day!

On Wednesday, the expectation of recovery was present the day after the previous day’s bottom. During intraday, the divergence in Commercial Aerospace’s Shun Hao Co. showed strength after divergence, which is quite impressive. This allows applying the second trading system—focusing on stocks that actively strengthen amid divergence.
The close even predicted that Huatai Yueyang/Wuzhong would be the main players; outside rumors mentioned Hujialou!
Many people asked about market experience that day. Briefly, you can look at the intraday chart of Shenjian Co. on February 6. I watched that stock’s order book for a long time, so the abnormal movement of Shun Hao on Wednesday can be seen clearly—obvious dual-seat order book. I boldly speculated these two seats, and usually the next day, there’s a good rebound.

The index bottomed out well that day, and such recovery often continues the next day. Late in the session, I front-ran PCB Technology, but in the evening, external conflicts escalated, leading to a gap down the next day. The index closed with a shadow and a positive candle, but if the index doesn’t stabilize, it can negatively impact tech stocks.
This late-day front-running didn’t succeed in arbitrage, but you can understand the idea.

On Thursday, after Wednesday’s recovery, most continued to recover, so I took profit. Looking back, the decision to exit was reasonable.

On Friday, after a bottoming day, there was an expectation of recovery again. The strongest sectors were optical communication, like RiseSun, MingPu Optical & Magnetic, which opened sharply higher—some even up 9%. It’s hard to believe! Such uniform bidding makes participation difficult.
Meanwhile, Shouneng Co., in the power sector, exceeded expectations. This also belongs to the post-bottom strength, making it worth watching.
GCL-Poly Energy and Jinkai New Energy both surged quickly at the open. Many chased Jinkai, but I kept emphasizing that GCL-Poly’s fundamentals are better, so after a pullback, there was institutional support in the afternoon. Jinkai’s volatility is mainly driven by a few quantitative seats, which highlights the importance of stock selection—logical stocks tend to be more moderate.

That’s the thought process for this week. It’s mainly low-frequency trading. In weak markets, focusing on core stocks is even more critical. Many stocks outside look miserable, so maintaining stability is quite an achievement.

Next, let’s talk about next week. On Friday morning, after a recovery, the market plunged again in the afternoon, filling the gap near 3980. Many people lost hope, and over the weekend, there was little discussion about stocks. Some urging to cut losses appeared. Usually, such situations signal a trend reversal is near.

The main reason for Friday’s decline wasn’t external conflicts; other countries’ markets didn’t fall much. Some said it was due to insurance funds cashing out, but experts say the impact is limited. Still, in weak markets, even small negative news can worsen the situation!
In weak markets, don’t chase uniform high opens for recovery; it’s easy to get caught in a trap. Overextending on long positions can lead to more kills. Divergence continuation makes it easier for the market to open low and rise high!

Relatively better sectors include electric power coordination and AI technology, with many sub-sectors.
Electric power coordination includes smart grids, transformers, wind power, and energy storage, with photovoltaics being even stronger. These are all related to electricity and often overlap in themes. Some sub-sectors can be listed separately if needed.
Currently, the most representative in electric power coordination are Yunnan Energy Control and Shouneng Co., with confirmed announcements. GCL-Poly Energy and Jinkai are more sentiment-driven. Others have low market recognition or are purely thematic small caps.
On Friday, a photovoltaic equipment stock, Mawei Co., Jiejia Weichuang, gained attention. The sector’s success depends mainly on these two.

In AI technology, recent days focused on storage chips, then on Xinyi Sheng and Zhongji, which performed better. Optical communication stocks are active. I won’t list all stocks, but they pulled back on Friday. They might face pressure again on Monday.
This sector tends to follow the index; if the index recovers, it’s hard to ignore.
People often say that large-cap stocks set the stage while themes perform, but maybe AI tech stabilizes the index, and electric power themes play the supporting role? That’s possible!

Regarding short-term trading, sentiment on Friday has already led the index’s recovery, perhaps the darkness before dawn. I guess a trend reversal could happen within three days, similar to late January to early February 2024.
On Friday, stocks like Huadian Liaoning, Huadian Energy, Shouneng Co., Dongfang New Energy, Yunnan Energy, and GCL-Poly Energy remained resilient, with sentiment stronger than the index.
After the Spring Festival, Yunnan Energy Control hit a maximum of 7 consecutive limit-ups, then mostly stopped around 5. Power sector stocks are more resilient. First, Shun Na hit the limit, then recovered, and Huadian Energy saw a significant move on Monday.
Huadian Liaoning also reached 5 limit-ups. If it exceeds expectations, there could be a capital attempt to break through.
The more the index falls sharply, the easier it is to see short-term opportunities—that’s also true.

Finally, I’ll summarize three strategies!
First, if the market is bottoming out and the next day continues panic with large gaps down, it’s worth trying deep water catch strategies—small bets for big gains. Theoretically, three dips are better than two, and two are better than the first.
The main risk is overly strong internet effects—if everyone expects recovery the next day, they chase bids, and high opens during a downtrend can be reversed, leading to more kills.

Second, focus on core short-term stocks. Currently, the electric power sector has a relatively high tolerance for mistakes. This week, it mostly didn’t trap, and despite weak index performance, many stocks offered good rebound opportunities, allowing safe exits.
Of course, if you can grasp the rhythm in certain AI sub-sectors, that’s also fine.

Third, wait patiently for market reversal signals—like a deep V-shape or volume-driven positive candle—before acting!

I won’t go into more details. The first two weeks after the Spring Festival didn’t go well.
Interestingly, despite the weak index, the last two weeks have been quite good, boosting confidence. Stay calm and patient. Looking forward to steady progress next week. Keep it up!