Perfect Oscillation Creates a Perfect Monthly Candle Close
2007/7/31 16:03:53
Today, with or without news, oscillation was inevitable. In fact, because the news broke, all sides in the market had relatively calm psychology during the oscillation. The biggest intraday plunge happened to go right back to retest and confirm the 4335-point breakout. Why? Because those who just entered at 4300 needed to protect their cost line, and today's news gave them exactly that opportunity. Since today is also the monthly candle closing day, the first two waves had no reason to deliberately smash the chart. After all, three waves of participants entered at different times, but at least on the point of being bullish, their interests are temporarily aligned. A good-looking monthly candle is naturally a must for all three.
With the monthly candle set, August's movement is simply one of several types: a long bearish candle, a doji, a long bullish candle, etc. From a purely technical perspective, the midpoint of this month's candle roughly coincides with the 1/2 line position. That is to say, the establishment of this monthly candle provides enormous protection for the 1/2 line breakout. While one can't say it's absolutely foolproof, at least for the bulls — especially the first two waves — they now have a first line of defense for medium-term operations. For the short term, it still comes down to the batch that entered at 4300. Their greatest wish, of course, is to quickly pull away from the current level, so this batch has the strongest short-term desire to go long. The 3600-point batch is naturally happy to see this succeed, and the 4000-point batch won't have major disagreements either.
However, on the fundamental side, there remain unclear areas. The state's assessment of the current economic situation still has variables, and this constitutes the most important factor affecting future movements. Therefore, whether the market can replicate the post-August movement from last year remains subject to enormous fundamental uncertainty. This is a factor that no single wave of participants can control — it's the result of a combined force. Of course, if everything were certain, the market would be far too boring. It's precisely uncertainty that makes beauty and miracles possible.
Technically, it's actually quite simple. In previous one-sided rallies, the 5-day moving average basically served as support, and essentially, in one-sided moves, there were never three days closing below the 5-day MA. Therefore, if you can't read overly complex charts, the 5-day MA — or for the medium term, the 5-week MA — is the simplest indicator. If oscillations don't even break the 5-day MA, what's there to fear? On the daily chart, one can first treat this as a divergence segment, then confirm whether the divergence segment is valid based on subsequent movement. For the short term, if the 4500-point area is passed through too quickly, it will plant technical hazards for future movement. If this week continues with long bullish candles, it will plant policy hazards given potential fundamental changes. But there are too many people rushing for quick gains right now, and this ID doesn't want to waste chips enforcing overly strict control, because this ID doesn't mind if this really turns into a divergence segment. This ID's current strategy is to do as little as possible and let the various weightlifters perform on their own.
On individual stocks, it's still the two main themes mentioned early on: index-component stocks and oversold stocks. Those oversold stocks rising from the annual or semi-annual moving averages are also gradually shaping up. Once the medium-term uptrend of the broader market is fully confirmed, they'll all rotate into rallies. But the key issue is that this confirmation is still not complete, so the short-term performance of oversold stocks remains inadequate.
In a word: being too obsessed with quick gains will ruin the market. The key for the broader market right now is to build a solid foundation. Around mid-to-early August, there will also be a medium-to-long-term policy tone-setting on the fundamental side. The specifics will be known when the time comes — there's no result yet, and that's where attention must be focused.
Today I can answer questions until 5 o'clock.
Replies
缠中说禅 2007/7/31 16:18:45
[Anonymous] Sina User
2007-07-31 16:15:06
Hello Chan master
I still can't understand divergence and the divergence segment — should I look at the MACD histogram bar height or the total area?
==
Under standard conditions, you need to look at both the yellow/white lines and the histogram area.
缠中说禅 2007/7/31 16:22:09
[Anonymous] 新手
2007-07-31 16:16:08
Teacher, for new investors with poor technical skills, is it okay to do long-term investing and ignore temporary fluctuations or pullbacks?
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If your technical skills aren't good, you can expand your operational timeframe to 30 minutes or above, even the daily chart. That way, you'd only trade once or twice a month. Also, maintain a good mindset — don't force yourself to buy and sell at the absolute best positions. Trading at the best positions requires practice and refinement; you can't achieve it right from the start. So you absolutely must not have unrealistic expectations.
缠中说禅 2007/7/31 16:23:07
[Anonymous] Sina User
2007-07-31 16:15:51
Chan sister: does today's 11:18–13:33 count as one stroke?
==
That's not one stroke — it's many strokes.
缠中说禅 2007/7/31 16:24:37
[Anonymous] Sina User
2007-07-31 16:22:37
Teacher: has this recent stretch of price action had many small-to-large transitions? There's a lot of disagreement on line segment classification. Could you elaborate further?
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Line segment classification will be covered in the next lesson — please wait.
缠中说禅 2007/7/31 16:25:14
[Anonymous] 与你同行
2007-07-31 16:23:21
Teacher, is the 1/2 line still referring to 4159 points?
=
For August, add another 15 points.
缠中说禅 2007/7/31 16:30:44
[Anonymous] RVAER
2007-07-31 16:26:19
A question for Chan master:
According to the theory that gaps must be filled, when will last Monday's gap-up opening be filled? Does it have to rally all the way to 4800 before coming back to fill the gap?
Will the 2nd and 3rd batches of newcomers voluntarily go fill the gap?
Thank you~
==
Who told you gaps must always be filled? Shanghai still has a big gap from the 300-something level that hasn't been filled — it's been over a decade.
缠中说禅 2007/7/31 16:35:15
[Anonymous] Sina User
2007-07-31 16:23:34
Chan master, how should we read the news? ——— Today both securities newspapers ran big spreads pushing steel stocks, saying institutions are continuously adding positions, yet buying in immediately gets you trapped! Should news be read in reverse?
==
At the end of last year, this ID clearly stated right here the two major themes for this year: steel and pharmaceuticals. The positioning in these two sectors began last year. When the major capital has spent this long operating, and you're thinking about the short term — that's simply not the same playing field. Of course you can't read it properly.
缠中说禅 2007/7/31 16:36:32
[Anonymous] Sina User
2007-07-31 16:31:56
Hello blogger! A question:
When interpreting price action from the hub oscillation perspective, should each sub-level segment of the hub oscillation be classified according to same-level decomposition rules? Or can it be classified according to non-same-level decomposition rules?
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Your concepts are unclear. There are no hubs on line segments — where would levels and same-level decomposition come from? Line segment classification follows its own principles, which will be covered in the next lesson.
缠中说禅 2007/7/31 16:38:37
[Anonymous] Sina User
2007-07-31 16:36:06
Boss, if the subsequent price action stays within the range of the 1st K-line of the top fractal, can it count as one stroke?
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No, unless a standard bottom fractal can be found later based on non-inclusive processing.
缠中说禅 2007/7/31 16:41:21
[Anonymous] Chu Kuangren
2007-07-31 16:37:18
I feel like when the market's bullish sentiment is strong, even 1f or line-segment-level rallies extend for a very long time..
When encountering these small-level extensions, judging the 1st sell point feels really difficult.. Should I just wait for the 2nd sell point.. Not sure if that's appropriate? Please correct me, Chan
==
Unless you feel your trading channel is particularly good and your judgment is particularly precise, don't participate too much in line-segment-level operations. At minimum, participate in operations at the 1-minute level or above.
缠中说禅 2007/7/31 16:43:17
[Anonymous] 学习
2007-07-31 16:40:59
May I ask, if 9 one-minute trend types overlap to form a 5-minute hub, is this 5-minute hub's price range the same as the one recursively derived from the 1-minute level?
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Not necessarily. You determine the 5-minute hub by combining in groups of 3+3+3.
缠中说禅 2007/7/31 16:47:59
[Anonymous] 砂
2007-07-31 16:38:15
[Anonymous] Sand
2007-07-31 16:25:58
I'd like to ask the blogger, today on the 1-minute chart during the morning 9:41-10:35 decline, there was no obvious divergence, so why was the subsequent rebound so strong? In many individual stocks you can clearly see an a+A+b+B+c pattern, but on the market's 1-minute chart it's not obvious at all.
Thank you
==
The concept of divergence, in its standard form, is used above the minimum level. On line segments, it can only be a quasi-divergence judgment. Because within a line segment, if it's a small-to-large type transition, you can't rely solely on MACD — the timeframe is too short and lacks sufficient sensitivity. Generally speaking, small-to-large transitions have a small consolidation platform. It's better to confirm the platform breaks upward before entering, because a small-to-large platform can break downward. But I must emphasize again: unless your technique is already very good, don't participate in operations below the 1-minute level.
缠中说禅 2007/7/31 16:48:50
[Anonymous] Sina User
2007-07-31 16:44:03
Boss, sometimes the market's "one stroke" may only have 5-6 K-line bars, moving rather flat, with inclusive relationships among them. If you apply inclusion processing, it can't form a stroke. Should inclusion be applied?
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Where there's an inclusive relationship, you must apply non-inclusive processing. Strictly follow the definition.
缠中说禅 2007/7/31 16:49:43
[Anonymous] 胡紧套
2007-07-31 16:46:21
Boss, how can Chinese football ever find hope? Is it currently in a bottom divergence phase? Haha
==
Losing to Brunei.
缠中说禅 2007/7/31 16:50:47
[Anonymous] 神抛弃的大道
2007-07-31 16:46:49
Hello Your Majesty, I have a small question about your theory: if 9 line segments forming a 1f hub simultaneously expand into a 5f hub, how is the range of the 5f hub determined? Could you explain, and ideally illustrate with a diagram? This question has been bothering me for a while. Thank you, Your Majesty, looking forward to your reply.
==
By the associative law. Combine in groups of 3+3+3.
缠中说禅 2007/7/31 16:52:03
Stone Three
2007-07-31 16:49:58
Boss, a downward segment, no matter how many strokes it extends, cannot be considered a line segment until it touches the last high point of the previous upward line segment, because the internal structure of the upward line segment hasn't been broken yet. ----Is this understanding correct?
==
Generally that's correct, but there are some special cases, which will all be covered in the next lesson.
缠中说禅 2007/7/31 16:55:59
[Anonymous] 大盘
2007-07-31 16:50:53
A question for the blogger:
a+b+c+d are 4 line segments appearing consecutively, where line segment b doesn't break line segment a, but line segments b, c, d overlap with each other (i.e., forming a hub),
In this situation, how should one react when currently at line segment b?
==
If B doesn't break A, then line segment A hasn't been completed — wait until A is completed before proceeding. Within line segments, if line segment A hasn't been broken, line segment B cannot exist. The details on line segment classification will all be covered in the next lesson.
缠中说禅 2007/7/31 16:57:00
Sorry, there are too many questions. Apologies for the many I didn't see or couldn't answer in time.
Have to go. Signing off. See you.
缠中说禅 2007/7/31 16:14:47
[Anonymous] Sina User
2007-07-31 16:10:56
Chan JJ, can a single stroke also have triangle patterns or running patterns like line segments?
Or to put it another way, can the non-top/bottom K-lines within a stroke exceed the range of the top and bottom? Must the top or bottom necessarily be the highest or lowest point of a stroke?
--
A single stroke is one top and one bottom — how could it have a triangle pattern? The top and bottom must of course be the highest and lowest of that stroke. If they aren't, then there's definitely more than one stroke inside.