A sharp decline with high volume, profit-taking sell-offs are beginning to emerge.

Today was a relatively meaningful volume-driven decline, but it seems that the trading volume still hasn’t reached the target. The highest volume today was less than 200 billion, and the market pattern has basically deteriorated. The support level has once again dipped near 3760. Originally, 3810 was a solid support level, but today it felt like a broken window paper, fluctuating back and forth. In this situation, it’s no longer a technical decline but a bloodbath for the chips, and the panic selling hasn’t been fully released. Therefore, the only option is a decline. [Taogu Ba]

Last Friday’s late-day drop indicated some panic selling, and this morning there was also a batch of funds fleeing. However, during the day, another group of bottom-fishing funds came in, so a further decline in the afternoon is normal. In other words, it’s a cycle of bottom-fishing and selling, repeating until no one is left to buy the dips. But what can’t be confirmed here is external intervention—if there is no external interference, this script might continue. If there is external intervention, the situation could change, such as market rescue efforts or other positive news. Here, I remind again: the phrase “use profits to trade stocks” before a major decline. No matter the situation, the maximum position size should not exceed the profits previously gained; otherwise, it’s reckless. If you can control yourself, then just watch the show.

Currently, the trend shows that funds with the ability to survive are tightening their holdings, while those unable to hold on are dying quickly. The logic here has become very subtle. That is, if the decline continues, high-value stocks may continue to hold their positions, but if the market rises, these high-value stocks might collectively be trampled. A typical example is $Dashengda (sh603687)$ and $Huadian Liaoning (sh600396)$—whether they fall or not determines if they will rise. If the trend continues tomorrow, there’s still a chance for new highs; if the market breaks down, it could get ugly.

Currently, all the top stocks hitting the daily limit are in the power sector. If this can expand, it might indicate a main trend. If not, it remains a secondary trend. Given that $Changfei Optical Fiber (sh601869)$ hasn’t ended, the communication sector’s main trend is still ongoing. Power was originally a downstream of communication and computing power, but now power has gained more interpretative meaning. Will power break away from communication and computing power to form its own main trend? That’s uncertain. The current power trend is also influenced by the surge in electric vehicle sales driven by high oil prices, which creates another narrative. This line diverges from the communication and computing power direction, and there’s also the risk of long-term electricity shortages caused by Iran bombing natural gas storage, which could last for years.

It is well known that Europe’s electricity mainly comes from natural gas power plants and heating. If natural gas issues arise, Europe may need extensive power upgrades, with photovoltaic solar power being the best option, driven by European environmental laws. The demand for various power generation equipment and parts for solar PV is becoming tight. Additionally, Elon Musk’s space-based photovoltaic project has decided to purchase 20 billion yuan worth of equipment and orders in China, further increasing demand for power-related parts and equipment. Therefore, the stocks hitting the daily limit are all in the power parts and equipment sector, which is currently a safe haven to avoid the 5000+ point decline.

As for coal, the reasoning is similar—it’s an alternative after high oil prices. Petrochemical and coal chemical industries have many substitutes, so coal can reduce dependence on oil. If power prices rise, coal prices tend to follow. This reveals another trend: the high oil price concept. Tonight, according to the refined oil price adjustment mechanism, 92-octane gasoline will increase by 1.8 yuan, pushing oil prices into the 9-yuan range. This is the “drop the bomb” moment, increasing variables significantly.

Many of these changes depend on tonight’s news and the reaction of the US stock market. If positive, there’s still a chance that tech stocks will continue to strengthen, as the logic behind communication and computing power remains intact, with no signs of major fund outflows. For example, $Risconda (sh603803)$ is still above the daily limit, and Yinzhijie is also strong. So, it’s not that communication has ended, just a matter of strength. We will continue to monitor.

That’s all for today. Please like, comment, and tip Cui Bo. Thanks to @SkyFlyTheFloor, @EatNoQueue, @YangYang, @SunshineAndRainbow, @YaoYao for the tips and support.

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