Endless Individual Stock Climaxes Under a Sluggish Index

2008/1/2 15:12:24

As the title suggests, the first day's market action continues to foreshadow the characteristics of this year's market: not much juice in the index, but plenty of juice in individual stocks. This has been repeatedly discussed since the end of last year. To put it in a more punchy, dynamic slogan: Sluggish index, climaxing stocks.

Of course, the index won't stay sluggish indefinitely. The index will often exhibit spasmodic trends — suddenly jerking up, then trembling non-stop. Two jerks, ten trembles — that's roughly what you'll encounter frequently on the index this year. The day the index stops having spasms and charges forward relentlessly, that's when you should actually be careful.

Technically, the index continues the oscillation of the 5-minute hub from late last year. Until a third-type buy or sell point appears, the trembling continues.

As for individual stocks, there's not much to say. Several of the stocks this ID has mentioned hit new highs above the 6124-point level again today. For individual stocks, the high from the 6124 level serves as a strength-weakness dividing line — once it's broken through and held, the rally becomes even fiercer. For example, 600737 is a perfect case: the high from the 6124-point decline was around 14 yuan. After breaking through and holding, it's now up above 20 yuan.

Of course, for specific individual stocks, there will inevitably be pullbacks after breaking through that level. The best approach to handle such pullbacks is to trade short-term swings in the direction of the trend, extracting price differences without losing your position. However, this demands high operational skill. Another approach is to set a medium-term reference like the 5-week moving average — as long as the pullback doesn't break below it, just hold. For example, look at 600737: it swung back and forth, scaring countless people out, but after its breakout and pullback, when did it ever effectively break below the 5-week moving average?

There will be bread on the table. This year, the earlier you act, the safer it is. Right now, for individual stocks, opportunities far outweigh risks. Even if a stock's yearly candlestick ends up bearish, it still needs to form an upper shadow first. But as we get past mid-year, things become uncertain. This year is about stockpiling grain early — if there's a second opportunity, great; if not, you won't go hungry either, as the year's bread will already be secured.

Never chase stocks at their highs. If you missed the earlier moves, look among low-priced and second-tier stocks for those that are slow to react but have capital stationed inside. Everyone's human, everyone needs to eat. As long as capital is stationed there, business will eventually open up — otherwise, who's going to pay for the year's expenses?

As for the big-cap stocks, if your technical skills are good, bleed them during those spasm jerks. When they're trembling, you don't necessarily need to play along.

Signing off for now, goodbye.