4.2 Pre-market Strategy

Today is another day that makes things tough for short-term traders. The overall market is broadly rising, but short-term data is at a low point. Honestly, it feels hard to trade short-term—most of all because there’s no consistent, fixed style to rely on. [Taoguba]

In terms of tactics, low-buying is relatively better than chasing. At the moment, most themes don’t have much staying power—most of them are a day’s peak, then the back rows get cut the next day, the front rows accelerate, and on the third day it just turns into a total loss (GG). If you chase, you certainly have to go to the front rows. The difficulty in going to the front row is this: at the instant the stock plates up, it’s hard to judge whether the sector will keep up afterward. If it doesn’t, the next day’s premium isn’t guaranteed, and the stock may blow up and break the board that same day.

For low-buying, it’s also somewhat random. If you’re bullish on today’s pharmaceutical-sector rebound—yesterday most people might have chosen Minerva—yet today Minerva’s performance is the worst. Also, for lithium mining, Rongjie Co., Ltd. (估计) likely attracted a lot of short-term funds as well. The lithium-mining logic isn’t bad, and the capital involvement seems deep enough; getting hammered straight down (a down) really isn’t easy to understand. Besides that, there are many other factors too—whether you’ll even get rotated into the next day’s spotlight by quant funds. In short, it lacks规律.
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Let me briefly talk about the tape**

Indexes: After a strong rebound following last night’s triple drop in US stocks, it mapped to us with a gap-up (high open). Then the whole day chopped around in a range—pretty much everything aligns with expectations that were fairly clear. After that, the 4000-point pressure level may turn into a grinding zone for a couple of days.

Sectors: The sector path is basically: the first day sparks (explodes), the second day sees divergence, and the third day directly turns into a sell-off/withdrawal phase. Good examples are like the power sector on March 24—repaired for two days, then divergence started again, and it eventually shifted into a sell-off. Perhaps pharmaceuticals are following the same path right now. Sector-theme stocks aren’t very suitable for left-side entries. Sectors that lean more toward an institutional style—like hard hardware/fiber optics—are more appropriate for left-side setups.

If we follow a normal sector trajectory, tomorrow the funds causing divergence in pharmaceuticals might rotate into power utilities and commercial aerospace.

Power, for example: yesterday, power utility names like Huadian Liaoning and Huadian Energy were relatively strong, so today they fall a lot. Meanwhile, Yuying Holdings, which rose less yesterday, looks stronger by comparison. When you look at others, the better performers are mostly oversold types like Jinkai New Energy and Tongxiang Energy (协鑫能源). They’ve fallen too much and then can’t fall further—today you see “double Hua” and Xinneng Taishan, Guangxi Energy catching up on declines (补跌). After this, the downside momentum of the sector weakens, which also makes sense as the chips improve. If the chips are better, that might attract quant funds.

Commercial aerospace: At this level, how should I put it? You can anchor it to two core names: Shenjian Co., Ltd. and Zaisheng Technology. Both are near the previous high area. Based on the “space-sector jerk” (渣男) trait from before—when the momentum gets hot, it suddenly stops short. Today seems to be trending in that direction. Can it change the awkward situation from the past? Tomorrow is pretty critical. You need behavior that’s beyond expectations—like if either Shenjian or Zaisheng, as a core, takes initiative to step up and turn from weakness to strength.

Right now, the conventional short-term environment is crowded. On top of that, the indexes and Tonghuashun hot stocks are going in opposite directions—this kind of backdrop means some broad-based ETFs or options might be simpler. And you can also look for places where investors “huddle together” (抱团取暖). Some more out-of-favor stocks, or certain directions—like Guosheng Technology and Farswin (法尔胜)—which are relatively independent in nature. Under these circumstances, it may be more suitable to watch more and trade less: pick one or two that give longer-term expectations, set stop-loss and take-profit levels, then do T-trades. Perhaps that’s safer than recklessly chasing and getting hit from both sides.

Also, there are stocks that are about to face regulatory expectations—once they’re regulated, naturally there’s also an expectation for regulatory clearance afterward. Or some that are “locked in for attention due to unusual activity”—for example, in commercial aerospace, Western Materials and Aerospace Development were “near unusual-activity” territory, but hadn’t triggered it yet. Swap the wording: the less distance you are from the abnormal-activity threshold, the more upside space remains. And for ST names, as well as crude-oil LOFs and similar instruments: T+0 trading lets you eat volatility rather than the index—these are also out-of-favor directions. But when short-term trading is hard, it might not be a bad idea to consider this kind of approach.

In the short term: when things are active, you should wait until Tonghuashun hot stocks stabilize, stay above the 5-day moving average, or there’s a clear main trend that can keep trending stronger—not like this situation where it looks like stocks are up every day on the surface, but in reality it’s all kinds of rotation and all kinds of intraday spikes that then give back…

Wishing you the best~

This article is only my personal review and recap, and does not constitute investment advice. Trading involves risk; be cautious and consider carefully