[Red Envelope] Amid the decline of the power sector, who will lead the new cycle?

Preface [Taoqian Bar]

《Receding Tide》

What Is a Receding Tide
It is
within China’s A-share market’s sentiment cycle,
the stage when the market shifts
from the peak frenzy period
to the phase of losses spreading and funds withdrawing.
At its core, it’s when the profitability effect collapses, market-wide consensus breaks down, and high-level positions begin to loosen—where, for shorts, the style rapidly switches from “making money with your eyes closed” to “chasing highs and getting trapped.”

There are two types of a receding tide:

• Elevator-style receding tide: The leading stock breaks down and goes limit-down and gets A-sold; frequent occurrences of double-top boards/closing without opening; the index and sentiment move in sync and drop hard, and the loss-making effect is intense.
• Stair-step-style receding tide: The leading stock shakes at high levels; mid-tier stocks continue to fall; rotation accelerates—gentle, but repeatedly luring buyers.

A simple summary:
If the leading stock doesn’t rebound after a breakdown, the height of consecutive limit-up boards keeps dropping;
With more limit-downs and more failed breakouts, the mid-tier keeps falling and a wave of losses follows;
Trading volume shrinks as price cuts from high to low—confirmation of the receding tide comes quickly and you should exit promptly.

I. Trading Recap:

1、Huadian Liaoning Energy: A low open that gets halted (nuked), and if it can’t repair upward within 5 minutes, that is an exit signal.

2、Jinniu Chemical: A high open followed by weakness also triggered an exit signal.

Now let’s look at other directions:

After two consecutive days of advancing, many fellow brothers on these days have eaten quite a lot of meat. Some screenshots are not convenient to show here.

II. Breakdown of the Trading Board:

（一）Index understanding: The market bottoms out and rebounds; the CSI 300 turns red after rising. Earlier, it had once fallen by more than 1%. The ChiNext Index and the Shenzhen Component Index narrowed their declines. The total turnover of the Shanghai and Shenzhen markets was 1.92 trillion yuan, an increase of 62.6 billion yuan versus the previous trading day. Today, the entire power-sector theme saw a collective receding tide. Funds overflowed toward commercial aerospace and the pharmaceuticals direction. For now, we can only treat those as the rotation lines during the receding tide; whether the trend can sustain still needs further observation.

（二）Consecutive limit-up board ladder: After the failure of Liaoning Energy’s 8-to-9 advance, the consecutive limit-up ceiling fell again to 4 boards. Today’s highest board was 5 boards. The previous article emphasized using Liaoning Energy’s走势 to divide sentiment stages here. At present, it is the second day after the breakdown. Tomorrow will be the third day after the breakdown. If Liaoning Energy can still move upward along an uptrend, it will be beneficial for the repair of consecutive limit-up sentiment. If a significant negative feedback appears downward, then the receding tide for this stage is officially underway. As expected today, at the open it went low and got nuked, then quickly hit the limit-down—showing that funds chose to cash out and exit during the receding tide. A normal receding-tide period is mainly to stay in cash and observe as much as possible, waiting until exhaustion signals appear before entering to gamble on corresponding repair expectations.

III. Sector understanding:

（一）Pharmaceuticals (innovative drugs)

Key stocks: MeinuoVao (7 days 6 limit-ups), JinYao Pharmaceutical, Lianhuan Pharmaceutical (2 consecutive limit-ups)
Catalyst logic

• Policy upgrade: Bio-pharmaceuticals are listed as an emerging pillar industry for the first time. Medical insurance negotiations lead to gentler price cuts, and the commercial insurance catalog is rolled out—improving the payment end
• Overseas surge: In Q1 2026, innovative drug BD authorizations exceed $60 billion, approaching half of all of 2025—global pricing power improves
• AI drugmaking catalyst: Eli Lilly and InSilico Medicine’s $2.75 billion collaboration ignites AI drugmaking sentiment
• Low valuation + fund bundling: The sector’s valuation is at a bottom; defensive funds cluster into it

（二）Commercial aerospace

Key stocks: Shenjian Co., Ltd. (3 consecutive limit-ups), ZaiSheng Technology (3 limit-ups in 4 days), Guanglian Aviation, Aerospace Power, Zhongheng Design (up to the limit)
Catalyst logic

• Overseas mapping: SpaceX plans an IPO in June with a valuation of $1.75 trillion, and A-share funds trade related targets
• Domestic industrial breakthroughs: Jiuquan airspace delineates danger zones; recoverable rockets enter the window for the first launch; Galaxy Power orders are scheduled through 2028
• Policy upgrade: Aviation and aerospace are upgraded to an emerging pillar industry, raising strategic position

（三）Non-ferrous metals · Aluminum

Key stocks: Minfa Aluminum, Changlv Shares, Tianshan Aluminum, Chalco International (up to the limit)
Catalyst logic

• Geopolitical shock: Iran attacks in the UAE and Bahrain aluminum plants, involving 3.1 million tons/year of capacity—global supply shrinks
• Price driver: LME aluminum price jumps 5%; Shanghai aluminum moves in tandem higher, and A-shares rise together
• Supply-demand gap: Europe’s high electricity prices keep cutting production; domestic capacity hits the ceiling, optimizing the supply-demand landscape
• Earnings support: Tianshan Aluminum’s Q1 net profit is forecast to increase by 107.92%, and the leading company delivers

（四）Fiber optics (optical communications)

Key stocks: Yangtze Optical Fibre and Cable (5 days 3 limit-ups, historical high), Hangdian Shares (4 days 3 limit-ups), Farsen Sheng (2 consecutive limit-ups)
Catalyst logic

• AI computing as a rigid demand: Wan-ka GPU clusters drive fiber optics demand; the global supply-demand gap exceeds 16%
• Technological breakthrough: Yangtze’s hollow-core optical fiber for commercial use reduces latency by 31% and increases speed by 47%, suitable for AI computing
• Telecom operator procurement: China Mobile and China Telecom restart procurement in 2026; domestic demand grows year-on-year by 20%+
• Earnings delivery: Yangtze Optical Fibre and Cable’s 2025 net profit increases by 20.4%, validating leading-company performance

（五）Electric power (leading decliner)

Key stocks: Huadian Energy, Jinkong Power, Henan Energy Holding (down limit)
Catalyst logic

• Policy headwind: The NDRC improves coal-power capacity and electricity pricing; removes compensation for older units—damaging the profitability logic for thermal power
• Wind/solar oversupply: Negative electricity prices appear in multiple places, squeezing generation profits; multiple companies preview 2025 earnings declines
• Funds fleeing: Early gains were large and valuations were relatively high; policy headwinds trigger concentrated profit-taking
• Mainline switching: Funds shift toward new mainlines like AI and commercial aerospace; the power sector gets “bled”

IV. Opportunities for Tomorrow:

（一）First-board up to second-board directions: Zhongheng Design;
（二）Consecutive limit-ups direction (track continuously): Lianhuan Pharmaceutical + Dangyao Pharmaceutical;
（三）Rebound-after-breakout pattern: None;

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