The Market Enters a Basic Support Zone

2007/11/28 23:16:09

Wrapping up a bit earlier today because tomorrow is the first critical juncture for the acquisition. I need to finish writing and then rest. This acquisition is absolutely a classic among classics. Right now, virtually all of China's top firms in this field are involved. In this ID's view, what we've seen so far may only be the prologue, yet it's already far more thrilling than any other acquisition saga. When I have time, I could write a screenplay about it.

The market continued its listless performance today, but it has indeed entered a basic support zone. First, measured by the head-and-shoulders top price-volume projection, targets are largely met. Second, a weekly support line that has never been broken since 2005 is not far below. Starting next month, the 10-month moving average will also rise into the nearby range. All these support factors are strengthening.

This month alone, the market has already dropped more than a "moderately prosperous" amount, so no matter what, next month will certainly see a rebound rally. Of course, where this month's candle closes is also important—if it closes around the current level or even lower, then the pressure after the rebound will still be substantial.

The short-term choice is simply: rebound first or plunge to full "moderate prosperity" first. If full moderate prosperity comes first, the rebound will be juicier; if the rebound comes first, then there's less juice—that's all there is to it.

On a medium-term basis, next month's action is crucial. If it starts with a lower shadow followed by an upward move, the trajectory will look better. Otherwise, if the rebound merely forms an upper shadow on the monthly candle, the pressure ahead will be enormous, and the full moderate prosperity target would be too conservative—filling the gap above 4000 points for an "initial prosperity" wouldn't be that abnormal either.

That said, one can start watching for the timing of this major rebound in the short term. Before it materializes, a large trap followed by a reversal upward isn't out of the question—if that happens, the significance of the rebound would be even greater.

Please note: whether you're a bull or a bear, anything without a trap has limited killing power. The reason 6100 points had some killing power was precisely because of the carefully orchestrated bull trap in the days leading up to it. There's deep knowledge here—if you can see through both bull and bear traps, your skills will have grown considerably.

Enough said. Tired now. Goodbye.