Stock Selection Must First Consider Politics

2008/3/5 15:16:02

Ping An's brazen defiance succeeding today was entirely expected. However, Chairman Shang's public statement about strictly investigating mega-scale financing temporarily offset the impact of Ping An's farce. Since Ping An will certainly need to put on a show of stability, they'll definitely conduct market-support operations on their own stock to curry favor with regulators for approval. Therefore, Ping An's price action will gradually stabilize and may even provide short-term support for the broader market.

Technically, a standard line segment downward divergence was followed by a return to the last quasi-hub, forming a new 1-minute hub. Thus, this hub's ultimate evolution determines the market's short-term direction. From a bigger perspective, the original 5-minute oscillation around 4331 has not yet been broken, because no third-type sell point has appeared.

The most important thing today is that the MACD red bars are still maintained. So as long as this hub's oscillation isn't destroyed, the chances of the market gradually improving remain excellent — after all, the Ping An saga has reached a temporary conclusion. However, Ping An's defiance will set a terrible precedent effect. Therefore, the market may continue to be buffeted by similar news. The ultimate resolution still requires regulators to concretely fulfill their public commitments — strictly investigating mega-scale financing — and this must be backed by corresponding regulations.

Although the broader market keeps seesawing, the sectors this ID has consistently emphasized — agriculture, venture capital, chemicals, environmental/new energy, consumer staples, and so on — have all shamelessly been running strong, with new highs appearing today as before. Even those condiment stocks could hit consecutive daily limits these past two days. Why? Because this ID picks stocks based on politics.

Individual stock rallies can of course be driven by any random factor, but ultimately, big money and major plans — making at least a mid-term play on a sector — if you don't pay attention to politics, there'll definitely be big trouble.

Look at the sectors this ID has positioned in — they're all in the direction of the nation's economic development. In today's report, Premier Wen even listed ChiNext as an important task for this year's economic work. What is that? That's politics. As for agriculture — 500 billion yuan of annual investment. Environmental protection and new energy — the most important direction for economic development. All of this determines the infinite vitality of these sectors.

Those who've been here for a while all know this ID never buys expensive stocks — because this ID certainly won't be carrying sedan chairs for others. And all the great bull stocks started from low prices. When this ID says anything above 20 is garbage, it doesn't mean there are no opportunities above 20 — but those are opportunities after the second, third, fourth hub. Why not buy when they're in single digits?

Right now, the key is to get into new mid-term stocks that haven't started their moves yet. What's the next big mid-term sector? It's pharmaceuticals. Why? Because medical reform will gradually begin to roll out — this is a long-term effective theme. So those low-priced pharmaceutical stocks will be extremely worth watching.

Note: the capital allocation by big money into a sector isn't completed in one day. So you can start by monitoring. After all, the most powerful short-term plays are still in sectors that have already launched. So if you want to make quick money, find the laggards within already-activated sectors. Once a stock that hasn't moved much before shows new capital flowing in and there's a corresponding technical buy point, then of course you can get in.

Currently, agriculture and venture capital have been pretty well mined and are in their main rally phase. Meanwhile, chemicals, environmental/new energy, etc. haven't heated up too much yet, so there are relatively more good entry opportunities to find. All of this requires your own searching. For example, when this ID mentioned condiment stocks a few days ago — there are only two stocks in the sector. If you still can't pick them out, there's nothing more to say.

As for high bonus/dividend distributions, that's a short-term theme. Once the market stabilizes and launches, those will definitely perform — it's just a matter of ex-rights versus fill-rights.

Today, some people from Saudi Arabia came by to discuss a project collaboration — no time to write posts, sorry.

Signing off, goodbye.