Fill the Gap Next Week—Bulls Have No Choice

2008/1/25 15:17:34

4778 points is really just a sheet of paper, but right now people's psychology is more fragile than paper. Looks like risk education has been too little—people haven't seen enough market crashes. Look at Hong Kong's Hang Seng Index, bouncing up and down wildly—A-share investors still need more seasoning.

By comparison, the Shenzhen Component Index has more leading characteristics, a point repeatedly made before. Today, this index has already filled the gap from this week's decline, while Shanghai obviously needs to catch up. That homework is next week's task. If there's no unwelcome news over the weekend, this task shouldn't be a big deal. Next week, filling the gap—bulls have no choice. If they can't even accomplish this, the bulls are destined to be frogs.

Note that because the current daily chart pattern isn't favorable, even if this stroke extends, there will surely be a downward stroke afterward to confirm. The position where this upward stroke ends is very important:

One, if it ends around 4818, that would be the weakest—then things won't be sparkling ahead, but rather a 10×10-meter sparkling mess instead.

Two, if it ends around 4918, there's still a fairly good chance of forming patterns like a double bottom or head-and-shoulders bottom on the pullback.

Three, if it pushes above 5000 before ending, then the pattern improves somewhat—as long as the subsequent pullback isn't too deep, the bulls can re-establish their batteries and attack again.

Therefore, the ending position of this upward stroke is very important. The market's ultimate trend will naturally be discerned in real time once it unfolds—no need for prediction.

These past two days' price action provide excellent practice for operating based on bottom fractals. Trading based on bottom fractals doesn't mean buying today—rather, you buy yesterday when the bottom probe fails to make a new low. Of course, if your technique is a bit better, you can confirm that the probe down is oscillatory in nature. Note: fractal-based operations don't wait until the fractal is confirmed to act—by then it's already in the "already sick" state, far too late. This point must be absolutely clear.

For example, after buying yesterday, today's trend continues maintaining a (1, 1) pattern, so you can ignore it and wait to deal with it when a top fractal appears. Of course, it sounds simple, but actual operation requires plenty of practice to master.

Actually, this bottom fractal operation is effective even for the most difficult put warrants. Look at the daily chart of 580989 these past few days—it's slightly more complex with an inclusion relationship. Look at the decline from 0.739 yuan—after ultimately dropping 50%, a bottom fractal appeared, and the buy point was this morning when it didn't make a new low.

Note, this is just a lesson—don't mess around with put warrants. If you don't have the skill, you're destined to lose everything—no joke. This is merely to demonstrate that this ID's theory can effortlessly handle even such tricky put warrants, let alone ordinary stocks.

As for yesterday's quiz answer, I'm happy to see most people answered correctly—of course, the third segment hasn't been completed yet. The question is that simple.

It's the weekend, deep winter again—everyone go replenish yourselves. The market's task next week is to fill the gap. As for everyone else, supplement whatever you're lacking—calcium, dental work, kidneys, heart, brain, clothes, homework, and so forth. Take your pick.

Signing off, goodbye.