Rebirth of the Capital Legend

"The 'emerging industrial chain' theme and the 'major infrastructure' theme are fundamentally different in their underlying logic and expectations." Amid the three's reflections, Zheng Jinming, who had been silent in the group, couldn't help but chime in, "I've said it before, among the major hot themes in the market, the 'major infrastructure' theme is indeed the best in terms of its solid underlying logic, certain future expectations, and the most consistent investment from major institutional investors."

It is said that the strength of the main trend is determined when everyone is rising and during periods of high market sentiment.

It's impossible to tell the specific strength or weakness from that.

When the market truly enters a period of decline due to speculative sentiment, and the overall investment preferences begin to diverge from high-risk to low-risk, the strength and weakness of the market become apparent. Previously, when the "major infrastructure" theme was adjusted, many heavyweight stocks and leading concept stocks in the main sector showed considerable resistance even during the correction phase.

Look at the stock 'Oriental Yuhong'. In its recent pullback, on which day has the stock price fallen by more than 5%?
Looking at the 'emerging industrial chain' sector, the contrast in the strength of the pullback in the vast majority of stocks amidst the market sentiment collapse is self-evident.

This also illustrates how difficult it is to break out of a sustained strong trend, reverse the past downward trend, and complete a breakthrough of the historical range of trapped investors without the support of underlying logic.

This check from 'Chinese Online'...

In the morning session, a large amount of capital rushed to push the stock to its daily limit before the stock had been fully traded.

I knew this stock would likely struggle to hold until the close today, and sure enough, after market volume started to falter in the afternoon, sentiment shifted, and a large number of short-term profit-takers who had been holding onto their positions began to sell off, suppressing the market's upward trend.

"Yes, the root cause is indeed insufficient trading volume." Old Qian nodded and said, "If the market volume were sufficient, based on the sentiment trend this morning, the 'emerging industrial chain' sector should have had a phase of accelerated volume contraction with consistent trend. It's a pity... The institutional funds that are clustered in the heavyweight main sector and the 'major infrastructure' sector are not following at all. The group of funds that have been attracted from outside the market to follow the trend are also unable to absorb the profit-taking and trapped positions that are concentrated at this position."

“Yes, actually, the rebound of the ‘emerging industrial chain’ theme, compared to the ‘major infrastructure’ theme that has seen consecutive surges in the past two months, and the main board heavyweight sectors such as liquor, white goods, pharmaceuticals, consumer goods, power, and finance that have already largely recovered from the deep troughs dug by the previous rounds of stock market crashes, hasn’t risen much at all. Even compared to the rebound gains of major market indices in this round, it is still at a relatively low level and can still be considered oversold.” Zhang Xinlei also chimed in at this point, “It’s just that the fundamentals are indeed a bit weaker, the so-called underlying logic isn’t that strong, and earnings expectations haven’t reached an inflection point yet. But looking at the future development of the industry…”

Looking at a longer timeframe, over the next three, five, or even ten years...

I feel that the 'emerging industrial chain' is the core driving force supporting the market's progress.

It is often said that "technology is the primary productive force." Although the number of new users in the current "mobile internet" has decreased due to the widespread adoption of smartphones, with the arrival of the 5G era and the development of broadband networks, there seem to be many opportunities for in-depth development within the industry.

Moreover, the new energy industry chain is only just beginning.

The current market is hot on the "major infrastructure" theme, with institutional investors heavily concentrated in sectors such as real estate, construction and decoration, building materials, non-ferrous metals, steel, coal, as well as liquor, white goods, pharmaceuticals, consumer goods, power, and finance. These sectors are all traditional sectors with relatively limited room for growth.

These traditional industries, although supported by corresponding fundamental logic.

However, in terms of future prospects, the room for growth seems very limited.

Moreover, current policies are also biased towards 'emerging industrial chains'. I think that... this main direction still has considerable opportunities in the long run.

Of course, it is true that the market is currently performing poorly and there is no significant involvement from major funds.

However, let's look at the candlestick pattern of the ChiNext index.

It's quite clear that the market has largely bottomed out. Even if there are fluctuations in the market, especially for small and mid-cap stocks, I don't think it will fall too far.

After all, this has been the result of the hype over the past few days.

After finally loosening the internal structure of the entire line and forming a bullish pattern, there's no reason for it to fall back down and return the structure to its original state.
So, looking at it all...

I think today's late-day sell-off was more like a shakeout.

Looking ahead, I am still optimistic about the 'emerging industrial chain' theme. As for the 'major infrastructure' theme, as well as the main board sectors such as liquor, white goods, pharmaceuticals, consumer goods, power, and finance, although their overall valuations are not high at present, these sectors have already risen significantly, and some sector indices are even close to returning to the level when the Shanghai Composite Index was at 5000 points last year.

In other words, these industry sectors have already fully reflected the expectations and achieved certain results.

Thus, the potential for imagination and hype will be very limited.

Furthermore, in these traditional industry sectors, there are indeed too many institutional investors forming cliques, making the market too heavy a burden. Given the current limited market liquidity, it seems extremely difficult to propel such a heavy vehicle upwards.

"Old Zhang, according to what you're saying, there's going to be an even bigger speculative surge in the 'emerging industrial chain' sector?" He Zhong pondered for a while and suddenly realized that what Zhang Xinlei said made some sense. He replied, "I also feel that there are too many institutional investors holding onto the 'major infrastructure' theme, as well as traditional sectors like liquor, white goods, pharmaceuticals, consumer goods, power, and finance. The so-called bulls in the market are actually potential bears."

If this continues as a large number of third-quarter reports are released in the market.

If the core leading stocks in these traditional industry sectors underperform expectations, then the fundamental logic behind the current institutional speculation will be broken.

At that time, the potential selling pressure on these industry sectors and individual stocks may be even greater than that on the current 'emerging industrial chain' theme.

Moreover, I also think that given the persistent liquidity issues in the market, a comprehensive and widespread price increase is indeed quite difficult.

It can be expected that the market trend in the future will most likely follow the rotation of the main themes.

Given the cyclical nature of the trend, it is unlikely that the 'emerging industrial chain' line will form a top range at this position.

Originally, the shape at the top shouldn't have been like this.

"The probability of the main theme continuing to rotate is indeed very high," Zheng Jinming echoed. "Although a large number of active short-term funds, especially those that have previously profited, are fleeing the 'emerging industrial chain' theme, the 'major infrastructure' theme still has some issues with its ability to absorb the siphoning of funds. It seems that a lot of the funds that have taken profits from the 'emerging industrial chain' theme have not entered the 'major infrastructure' theme. It seems that many funds are still observing the market trend after taking profits briefly."

Meanwhile, the "major infrastructure" sector has not had much time or room for adjustment in recent market trends.

It seems that this is not the case for these short-term speculative funds.

Currently, many popular stocks in the "major infrastructure" sector still lack cost-effectiveness for speculation.

Since the "major infrastructure" theme is currently difficult to gain the approval of most short-term investors and is unlikely to attract a large number of funds in the market to work together to continue going long.

So, once this group of short-term profit-taking funds gathered in the 'emerging industrial chain' sector completes their exit and their sentiment and market sentiment stabilize again, there is indeed a possibility of another wave of market activity. After all, in terms of market news, there is currently no shortage of positive news in the 'emerging industrial chain' sector.

Of course, all of this is based on the premise that the sentiment is relatively good and the market does not crash.

Based on recent trends in overseas markets and the Hong Kong stock market, I believe the Shanghai Composite Index is still quite safe at its current level.

“Yes, as long as the market can stabilize and doesn’t crash, we don’t need to worry too much about the short-term emotional disturbances and profit-taking.” Zhang Xinlei continued, “As for the ‘Huawen Online’ stock, I didn’t have time to sell it at the limit up price. Now, looking at the stock’s trend… there’s really no need to sell it anymore.”

"Looking at the trading volume of 'Huawen Online' stock, although the selling pressure is a bit heavy, there is still hope for a reversal and a rebound," Old Qian said, his eyes fixed on the stock's movement. "If we didn't sell at the limit up price before, we can definitely wait and see. If it can maintain a gain of over 6% in the next ten minutes or so, I think there's a high probability that it will surge and rebound in the final stages of the trading day."

After all, there are quite a few speculative funds driving this stock up today.

In particular, the funds that followed the lead at the limit-up price in the morning session, as well as the funds that were the main force in sealing the limit-up price.

These funds will most likely be used to support the stock price, especially if the stock fails to close at the limit up price before the market closes, particularly if it can't even maintain a 6% gain.

Then, the emotions fermented after the market closed.

Tomorrow morning, without the expected outcome, there's a high probability that a large amount of capital will rush to buy this stock.

Such a large number of funds rushing to cut losses will inevitably cause a significant gap down at the open, or in extreme cases, it is entirely possible that the stock will open at the daily limit down.

In that case, the large number of short-term funds that entered the market today would be trapped inside.

I feel that this stock still has potential, and given that it remains at the top of the market in terms of attention and discussion, and despite the fact that the "major infrastructure" theme is rising against the trend and has not absorbed too much active capital from the market, and has not yet fully formed a new core market hotspot, this stock can still attract a group of short-term investors with a higher risk appetite to enter the game.

In other words, right now.

The potential buying power for the 'Chinese Online' stock is not expected to weaken quickly. If guided well, there seems to be a chance to form a unified bullish force.

“There is a chance of it being resealed,” Zheng Jinming said, “but the risk-reward ratio is not very high.”

“Forget it. Looking at the trend of ‘Huaxin Cement’, it has completely formed a seesaw effect with ‘Huawen Online’. And currently, the short-term main force funds are still flowing into ‘Huaxin Cement’ on a large scale.” He Zhong listened to the analysis and judgment of the others. Although he still had some hope for the trend of ‘Huawen Online’, which he held a large position in, he knew that the hope was not great. He also understood that the primary trading principle should be to respect the trend of the market and not to fantasize, or to subconsciously make positive psychological suggestions. So after thinking for a moment, he gritted his teeth and made up his mind to sell all the ‘Huawen Online’ shares he could. “Since the ‘major infrastructure’ sector is still siphoning the liquidity of the ‘emerging industrial chain’ sector, it’s better to respect the market and sell all the related shares that can be sold. It might be safer and better to make a decision after the subsequent certainty becomes clearer.”

“I really didn’t expect that even Mr. He couldn’t hold on.” Zhang Xinlei said with a smile. “You guys go first, I’ll wait a bit longer. Based on the historical performance of speculative stocks, even if they have peaked, it is very rare to see a sharp V-shaped reversal. As long as the market enthusiasm and discussion surrounding 'Huawen Online' are still there, even if it cannot reach a higher high, there will most likely be a rebound and correction, which means there will be a corresponding right-side selling point. So I’m not worried at all about seeing this stock plummet. Of course… my cost basis for this stock is relatively low. At worst, I can just give back the 25% profit I made from this stock in the past few days to the market.”

"Haha, Lao Zhang has such a good mindset," Lao Qian chuckled. "As long as the market doesn't experience a sharp correction, or rather, there's a risk of a sustained correction, I think that under the overall market trend of rotating main themes, the 'emerging industrial chain' sector is unlikely to fall directly back from here. The subsequent trend will definitely fluctuate. At least for now... the consistent buying power of the 'major infrastructure' sector is indeed somewhat insufficient. Perhaps the adjustment time and space of the 'major infrastructure' sector are indeed too limited. In addition, the institutional funds that have been accumulating in it are indeed too tightly clustered, and the speculative funds that will participate later are not willing to continue to push the price up at this position."

"Yes, as long as there's no risk in the overall market, the market trend will inevitably fluctuate," Zhang Xinlei said firmly. "I don't believe the ChiNext index will continue to fall back to its previous lows based on its candlestick pattern. Moreover, considering the current market news, policies, and sentiment, there's no reason for the Shanghai Composite Index to fall below 3000 points. In other words, the overall market risk is controllable, so... the rapid decline and correction of core leading stocks in the short term shouldn't be a selling point, but rather a good buying opportunity to increase positions." (End of Chapter)