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Bulls: Die Early and Reincarnate, or Fight with Your Backs to the River?

2007/12/18 15:31:11

The situation for the bulls right now is perfectly clear: two choices—die early and reincarnate, or fight with your backs to the river. Technically, this ID has analyzed it very clearly. On the weekly chart it's (-1, 0). On the daily chart there are two options: create a (-1, 0) above 4778 points, which would give the bulls a chance for a last-stand battle; otherwise, die early and reincarnate.

On the medium-term, this ID has repeatedly emphasized that after the rebound, a second bottom test is inevitable. Back at the end of November when discussing the December monthly K-line pattern, it was already explicitly stated that there would at least be an upper shadow testing the rebound against the long-shadowed body of November—this has already been achieved. The remaining question is actually very simple: will this monthly K-line form a containment relationship, or will the downward stroke on the monthly chart continue to extend—that is, whether 4778 points will be broken in December. Once broken, it means the monthly chart must develop a downward stroke, and before a new bottom fractal appears on the monthly chart, all medium-level upward movement is off the table. This is technically beyond debate—it is inevitable.

Using a more refined analysis: the question is where exactly the 1-minute downtrend from 5209 points ends. If it ends above 4778 points, then the worst-case scenario won't happen immediately—meaning the market rebound at worst could form something like a converging triangle shape. Otherwise, this 1-minute decline will be the first segment of a major-level decline, and at the very least one must wait for this level of decline to complete before there's any possibility of medium-term stabilization.

Currently, the 1-minute decline from 5209 points has already formed two hubs, and the movements within are extremely standard—for example, this morning's rebound was the third-type sell point of the second hub, followed by continued decline, all very textbook. The question below is whether a divergence can be manufactured subsequently, and more importantly, whether the rebound after divergence will be blocked within the second hub's range. If so, the subsequent trend will be decidedly unfavorable for the bulls.

Honestly, the current situation for the bulls is truly a one-path-up-Huashan scenario. Unless a trend that directly breaks through the 5200-point neckline emerges, whether you die early or die late, death is death—might as well die early and reincarnate sooner.

Actually, breaking below 4778 points is not the end of the world. On the contrary, it will inevitably create a divergence in the trend, meaning the breakdown is also a bear trap—it's really not a big deal. Stubbornly holding here would actually make the trap kill more people. So if the bulls don't have the power to break through 5200 directly, they might as well die early and reincarnate. For example, if this life wasn't lived wisely—being a bull at 6100 points—then reincarnate and live more wisely next time. That's not necessarily a bad thing.

The above is about the broader market; individual stocks don't necessarily correlate much with the index. Even if the market breaks down, those stocks that are certain to be the focus of major moves next year will definitely use the trap to wash out the weak hands. As for PetroChina and the like—the other day at dinner, someone asked this ID about it. This ID said: since it opened at 48, going down to 24 would be just fine. 48—those who "must get rich" ("si dou yao fa") all died; 24—those who want to die ("xiang si") will instead live. This got this ID denounced at the dinner table, people saying this ID is too cruel, asking how those at 48 are supposed to survive. But the market has never cared about anyone's life or death in order to stop being a market. Of course, PetroChina at 24 was just wine-table talk. To be honest, from a long-term interest standpoint, this ID would actually like to see PetroChina at 14 yuan, but I doubt anyone would offer that price. In reality, PetroChina has also produced a line-segment-type downtrend on the 30-minute chart, and one should start paying attention to the manufacturing of a bottom divergence.

On the ultra-short-term, tomorrow and the day after are the bulls' final chance. If they still can't muster strength, then just die early and reincarnate. This ID's operational principles have been repeated many times: those without technique should continue the glorious, great, and correct path of sitting on the bench; those with technique should keep working on strong stocks. Of course, if certain stocks show major bottom divergence, they are worth paying attention to. However, even if the bulls can rally, if the rebound again fails to recapture 5032 points, you must be careful about getting nicked by the knife.

Signing off, see you next time.