Hexun Investment Advisory Xu Xin: Pre-market Forecast for March 23

During the weekend, global assets experienced another decline and adjustment, with external markets showing sharp instability. Last Friday, the A-shares closed with a long-legged doji candlestick, the Nasdaq index fell 2%, the S&P 500 declined 1.5%, and the Dow Jones dropped 0.96%, all in a downward trend. On Friday morning, the Shanghai Composite Index temporarily rebounded but began to plunge continuously in the afternoon, mainly due to renewed external sentiment escalation. This sentiment did not ease over the weekend, and crude oil prices remained high, fluctuating around $110. Overall, last week was tough for the market, especially Thursday and Friday, with nearly 4,800 stocks adjusting daily.

In previous adjustments, we have consistently warned that until the downtrend changes and the Sci-Tech Innovation Board 50 Index breaks its downward trend, trading should mainly be with small positions. The 60-day moving average serves as a mid-term bull-bear dividing line; once broken, it indicates a weakening mid-term trend. If the 120-day moving average is broken, it signals a weakening long-term trend. After breaking these levels, the market needs time to recover. During this period, position size acts as an amplifier of emotions; overly heavy positions can intensify volatility. Currently, the market has experienced two consecutive days of extreme lows, forming the sixth sequence position, similar to some previous zones, but this round of adjustment is more influenced by external sentiment and differs from technical corrections following previous rallies.

For the market to continue rising rapidly, external news and sentiment need to ease. From the weekend situation, the situation has not improved, so Monday is likely to open with inertia and a gap down. After the sixth sequence, the market previously formed a doji star at the seventh sequence, followed by rebounds at the eighth and ninth sequences. After continuous declines and panic-driven sentiment, last Friday saw a volume of over 170 billion, reaching a nadir, indicating that extremes often reverse. The key support area next week is around 3916 to 3900 points, which was a zone of previous continuous activation. Currently, the Shanghai Index has formed a technical head-and-shoulders top, with the daily KDJ J-value at -6.5; rebounds usually start when J turns positive again. This rebound should be viewed as a counter-move after a continuous decline, with a true bottom typically confirmed after the first upward wave, followed by a pullback and another rise, or after major positive news triggers a tower bottom or bottom-dividing pattern, then moving upward. Sustained upward movement often occurs after forming complex bottoms, W bottoms, triple bottoms, head-and-shoulders bottoms, or arc bottoms, followed by a breakout.

Next week, the Sci-Tech Innovation Board 50 Index will face the neckline of a daily head-and-shoulders top pattern, near the previous low of 1282 points. Its C-wave has already broken below 1330 points, also in the eighth sequence position, resonating with the eighth and ninth sequences of the Shanghai 50 Index. The Sci-Tech Innovation Board 50 Index declined earlier than the broader market, releasing panic more fully, and may rebound before the broader market. However, during the rebound, it will first face resistance from the 5-day moving average.

In summary, Monday may see an inertial gap-down followed by an oversold rebound, but if positions are heavy, it could be an opportunity to reduce holdings. For the market to truly start a new rally or continue an upward trend, external sentiment needs to ease, negotiations should begin, and domestic policies should stabilize the market. Once the correction ends, the downtrend is broken, and the market re-enters an upward trend, space for growth will open up.

(Author: Zhang Yan)

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