Hold Through Tomorrow, and the Fourth Wave May Finally Break Free

2007/8/9 16:04:24

Yesterday this ID said that after ICBC went crazy, the fourth wave could only continue rotating sectors to deceive the fifth wave into entering. Today, sector rotation unfolded once again. Of course, this ID has already defined the nature of this phase of the rally: a bubble-driven rally in component stocks. Ultimately, the big elephants must dance a minuet, and even transform into little birds flying everywhere across the sky. The market's development continues to unfold according to this characterization. As for which day the bubble will finally burst — there's no need to predict. The market will provide the answer naturally.

In terms of price action, segments 20-21 in the chart below represent a quasi-third-type buy point for the 1-minute hub of 14-17. From the perspective of the 5-minute hub at 8-17, whether a third-type buy point can form tomorrow becomes extremely important. (Note: when the chart is rescaled, the numbered labels in the chart shift. This ID only discovered this issue today. The position of 17 in yesterday's chart had shifted — today's position is the correct one. Actually, this is easily identified from the definition. After 17, there is an X in the upward segment, which is because it doesn't constitute a stroke. Therefore, 18 must be at the current position to satisfy the requirement of at least three strokes.)

Hence today's title is stated in this context: as long as they can hold through tomorrow and form this 5-minute hub's third-type buy point, then — provided the weekend brings no major bad news — give them two more days to aggressively promote, and next Monday, new capital will have a chance to flow in. Today's shrinking volume makes the fourth wave's efforts look unreliable. Therefore, tomorrow's third-type buy point is critically important. Once the price falls back into the 8-17 hub, the possibility of this group becoming the bag-holders doesn't even need to be discussed.

For those who can't understand the above, this ID has already provided the simplest method: follow the 5-day line for short-term trading. But this alone can let you hold stocks with peace of mind. Those with higher technical skills earn higher profits — that's only natural. If you can't handle the complex, then play it simple — absolutely do not eat half-cooked rice. If you know it, you know it; if you don't, study until you do. Before mastering it, use simple methods for trading. For those who have already mastered it, you should also cultivate a good habit: while watching the market, segment the chart in real-time. This way, trading becomes crystal clear. This applies to both the broader market and the individual stocks you're trading.

Note: this ID has said I'm only riding the sedan chair, but nowhere has this ID ever said I'm bearish. The sole secret of how this ID has survived and continuously grown stronger in the market for over a decade is: after a bottom, only ride the sedan chair. This ID's approach is simple: after setting aside flexible capital, maximize positions, then continuously capture spreads during hub oscillations while maintaining position size. Normally, by the time a rally tops out, this ID's original cost basis has declined to 70%-75%. Note: shares aren't lost — it's just that more cash has accumulated, so the position ratio naturally drops. This way, no matter what happens, this ID has already won big.

In the market, the key is maintaining long-term profitability. This ID has never seen anyone who enjoys being a sedan carrier ultimately survive. Whoever wants to carry the sedan can go ahead — this ID remains as always. And this ID will also be quite ungracious, frequently criticizing the carriers' posture as ungraceful and movements as revolting. For example, today this ID must criticize: carriers, this ID's other China-prefix stocks are all doing fine, but Sinopec and Bank of China are a bit limp — they haven't even made new highs. Any carrier with some strength, give it a push. Also, those carrying Chalco — make your movements more graceful. Today's performance was particularly revolting, creating a double-needle formation. Weichai Power's carriers — be more nimble with your hands and feet. It's going above 100 anyway, so stop striking so many poses. Air China is also rather ugly, can't even match China Southern Airlines. How is your Chairman Li going to face his military friends?

Stocks — you need a relaxed mindset. If you can't even ride a sedan chair, then be a carrier, or just become a dumpling for others to eat.

Today I can answer questions until 5 o'clock.

Replies

缠中说禅 2007/8/9 16:14:48
All Red Delete all comments by this person

2007-08-09 16:09:56
Hi, how come these waves of buyers aren't visiting our sedan chairs?

==

This is a component stock rally. First it's the top 50, then the 300, and finally it rotates to second and third-tier stocks. Of course, this isn't absolute — it's just the general direction.

缠中说禅 2007/8/9 16:18:21
[Anonymous] 与你同行 Delete all comments by this person

2007-08-09 16:14:41
Teacher, the index is soaring wildly, but many stock prices aren't moving and are even falling — how to understand this?

==

This is perfectly normal. In the first half of the year, when second and third-tier stocks were rallying, the large-cap component stocks weren't moving much either. Fortune's wheel turns.

Starting today, you can gradually watch stocks in the CSI 300. The top 50 will gradually spread outward. Of course, you can also watch stocks in the top 50 that haven't moved much — everything that hasn't moved will get its turn, provided there's a buy point at a certain level.

缠中说禅 2007/8/9 16:21:19
[Anonymous] Heng Ling Delete all comments by this person

2007-08-09 16:17:25
Blogger, I keep seeing top divergence on the market chart but it doesn't fall. Am I reading it wrong?

==
MACD is auxiliary. First you must identify the trend structure clearly — otherwise how would you know which segments to compare? This recent upward segment can first be viewed as a 5-minute level divergence segment. If the divergence holds, it'll at least fall back to around the 4600-point hub, and the result will come by Monday at the latest. That is, whether this divergence segment holds or not.

缠中说禅 2007/8/9 16:24:21
[Anonymous] Sina User Delete all comments by this person

2007-08-09 16:20:32
Sister, what's your view on China Unicom 600050 (a China-prefix stock!)? How should retail investors operate (extract value) with it?

==
This ID has held it all along — just waiting for China Mobile to come back. Also, China Unicom is set to take over all of China Mobile's current GSM business and customers. Of course, this plan may still change. To fully play out Unicom's story will take at least N years — it's still early.

缠中说禅 2007/8/9 16:25:01
[Anonymous] 白玉兰 Delete all comments by this person

2007-08-09 16:10:54
Hello!

It's been a long time since we directly chatted.

==
Good.

缠中说禅 2007/8/9 16:26:22
All Red Delete all comments by this person

2007-08-09 16:24:30
Thanks! Are these top 50 the Shanghai-weighted top 50? I check them often. There's also the SSE 50 sample stocks. It should be the former, right?
Looks like I misunderstood what "component stocks" means. Pretending to know when I didn't...
＝＝＝＝
Chán Zhōng Shuō Chán 2007-08-09 16:09:56
Hi, how come these waves of buyers aren't visiting our sedan chairs?

==

This is a component stock rally. First it's the top 50, then the 300, and finally it rotates to second and third-tier stocks. Of course, this isn't absolute — it's just the general direction.

==
It should be the top 50 by weight across both exchanges. Then the top 50 from each exchange makes 100 in total. Then comes the 300. Generally, that middle level is rarely used.

缠中说禅 2007/8/9 16:30:15
[Anonymous] 胡子大将军 Delete all comments by this person

2007-08-09 16:23:52
Between labels 17-18, why isn't the segment from 11:22-13:12 counted as a segment? It's 3 overlapping strokes and breaks the previous stroke.
Also, if 18 doesn't make a new high, how do you divide the segments?

==
Of course that can't count. In such cases, you need to look at the bottom pattern of that segment's characteristic sequence — and here there isn't one, so it doesn't qualify. Whether or not a new high is ultimately made isn't a big issue. Of course, if no new high is made, this segment may become a triangle — this will be covered in the later discussion on segment patterns.

缠中说禅 2007/8/9 16:33:36
[Anonymous] 贪心病犯了的人 Delete all comments by this person

2007-08-09 16:23:10
Hello, I'm stuck in 802. Is there still a chance to break even in the short term? I know the day before yesterday you had very clear guidance on 802, but I got greedy again, and the result...
Could you please give hints about its recent direction? Thank you!

==

This ID is also puzzled — selling above 26 yesterday, but not many followed along. It was like this ID fought a Battle of Tashan blockade all alone. This stock needs to rest a bit, but by 2008 it will definitely be higher than 26 — that's certain. On the way down, this ID will buy back and lock in the spread.

缠中说禅 2007/8/9 16:37:33
Stone Three Delete all comments by this person

2007-08-09 16:32:52
Boss, when will you talk about line segment division for individual stocks? Operating individual stocks based on the broad market isn't working well. Also, could you comment on the China-prefix stock you mentioned — the sedan carriers there haven't been performing well these two days.

==

737 has no big issues — after rising N yuan, it's time for a washout. This stock's technical pattern isn't perfect enough yet. If the lower moving averages can move up and create some intertwining of short, medium, and long-term averages, that would be more perfect. The current question is whether there's enough time — just have to try.

缠中说禅 2007/8/9 16:41:06
[Anonymous] 缠心禅意 Delete all comments by this person

2007-08-09 16:32:51
Hello! Hub division is really difficult! Strokes and line segments are the raw materials, and hubs are like one maze after another. Is this the key to learning Chan Theory?

==

Follow the definitions — it's very simple. This isn't the key but the foundation — even more critical than the key.

缠中说禅 2007/8/9 16:43:28
[Anonymous] 执迷不悟 Delete all comments by this person

2007-08-09 16:34:46
"As for that stock with a cost much lower than Sany, it too has gone from 7 yuan to 10 yuan. This stock has uncertain fundamentals — don't chase it at high prices. This ID doesn't have great confidence in this stock — it's more like a highway robbery, just raiding it for a haul."
---- Boss, since you mentioned this stock, the broader market has risen over 30%. Look at how much 600375 has gained — half the stocks on both exchanges have outperformed it. I really want to just tell the boss "save it, focus more on teaching technicals — don't mention individual stocks anymore. It's got us small retail investors running around east and west every day, and the proportion of losses is even greater."
"This stock has uncertain fundamentals — don't chase it at high prices. This ID doesn't have great confidence in this stock."
---- See, see, the boss got it wrong again. ---- Got the fundamental analysis wrong, but thanks to the broad market, it also rose 30%.

==

Seems you don't know what fundamentals truly are. Things that can't be analyzed through conventional means and must go through Chinese-characteristic procedures — those are the fundamentals. 600375 going from 7 yuan to 10.5 yuan, nearly 50% in less than a month — it should rest a bit. That's the technical side. As for the fundamentals, you'll know when the time comes.

缠中说禅 2007/8/9 16:45:46
[Anonymous] 大盘 Delete all comments by this person

2007-08-09 16:39:04
May I ask the blogger:

The determination of a line segment's completion is somewhat lagging in nature, because you need at least one downward stroke in a quasi-top pattern to make the final determination.

Although MACD can assist in earlier judgment, sometimes even after a high-volume strong rally, the line segment pullback can be as much as 6%, while other times it's only 1%+, forming a quasi-third-type buy point.

So from an operational procedure standpoint, for a line segment departing upward from a hub, should you sell even if the pullback amount doesn't even cover transaction fees, and then decide whether to buy back based on how things develop? Or is there a good method to distinguish the potential pullback magnitude?

Could you re-explain the operational procedures incorporating the line segment concept? Thank you.

==

You're not supposed to trade based on line segments — it should be at least at the 1-minute level and above. Of course, in practice, trading based on line segments is also possible, but then you need to use the concept of quasi-divergence.

缠中说禅 2007/8/9 16:47:46
Little Maruko Delete all comments by this person

2007-08-09 16:20:10

"In terms of price action, segments 20-21 represent a quasi-third-type buy point for the 1-minute hub of 14-17"

========== Could you explain why 20-21 isn't the third-type buy point of the 1-minute hub at 16-19?

==
It can be seen that way too — it's just that if viewed as 14-17, then what follows would be hub extension.

缠中说禅 2007/8/9 16:51:30
[Anonymous] 白玉兰 Delete all comments by this person

2007-08-09 16:14:03
I still hold a lot of Shandong environmental protection shares. Is there still a chance?

==

000915 — please look at the monthly chart. You tell me, is there still a chance or not?

缠中说禅 2007/8/9 16:54:02
[Anonymous] 大道 Delete all comments by this person

2007-08-09 16:49:13
Hello, Your Majesty. After studying your line segment theory, I've gotten a little entry into understanding the broad market's trends. But the headache is that my capital has always stayed at low levels, because I can never grasp the rhythm of sector rotation. Could you provide some guidance on sector rotation or how to identify market hotspots? Thank you, Your Majesty. Looking forward to your reply.

==

Sector rotation spreads outward from a core. For example, this time the core is the top 50 large-caps, then it spreads to the 300, then to second and third-tier stocks. This process is underway. Whether it can be completed requires many factors — for instance, whether the policy environment can support it for that long.

缠中说禅 2007/8/9 16:57:10

Strange — how come the replies from just now didn't show up? Sina's new system isn't very reliable.

Almost 5 o'clock. Signing off for now, see you later.