How to position after a broad rally? February 4th, a dual-driven approach with technological offense and resource defense!

Good evening everyone. Today, most people experienced a setback; yesterday was ICU, today KTV. Actually, for me, it’s okay. Both non-ferrous metals like gold and silver from Hunan were sold at their highest points before hitting the limit down. These past two days, I’ve been trapped in “Zinc Industry Co., Ltd.” and ate two bowls of big noodles. However, our AI applications and core chemical stocks all surged significantly, and with sustainability. I believe friends who read the articles are clear about which stocks they are.[Taogu Ba]

First, I’ll talk about the index range and general trend for tomorrow and the day after. The index will likely revisit and confirm support, then continue to oscillate upward. From this low position, both the 60-minute intraday chart and the daily chart show divergence at the bottom, so if tomorrow’s rally pushes to 4070-4080, there will be resistance. Then a pullback to confirm a double bottom would be safer, especially since today’s volume was shrinking. It’s better to wait for a pullback near 4002 to confirm before making moves.

一、February 3 Market Review: Broad Gains and Recovery, Sentiment Significantly Improved

After a sharp decline, today’s market saw a recovery pattern, with all three major indices rising. The Shanghai Composite increased by 1.29%, the Shenzhen Component by 2.19%, and the ChiNext Index by 1.86%. The Shanghai index rebounded after a “second bottom” at 4002 points during the day. Market sentiment improved noticeably, with over 4,800 stocks rising, and the number of stocks hitting the limit down sharply decreased to 22 (from 123 the day before). The average stock price across all A-shares rose by 2.76%. The only downside was that today’s volume was still shrinking.

Hot topics and rotation rhythm: The market showed a broad rally, with rapid sector rotation, but no absolute new mainline emerged.

1. Technology Growth Sector: AI computing power (CPO), commercial aerospace and space photovoltaics, data center computing power performed actively all day, with multiple stocks hitting the daily limit. The core drivers are the global AI computing wave and SpaceX’s acquisition of xAI, which stimulated space energy concepts. During the day, affected by false rumors (“small essays”), stocks like gaming and Cambrian dipped temporarily but recovered in the afternoon.

2. Cyclical and Consumer Sectors: Chemical, liquor sectors surged in the morning. The previously heavily hit precious metals sector rebounded as international gold prices stabilized. However, some high-premium funds still hit the limit down, indicating leverage funds are still clearing out. After a decline, these sectors are expected to rebound continuously, especially focusing on chemicals, copper, and aluminum within non-ferrous metals.

二、February 4 Market Outlook and Core Trading Guidelines

1. Index and Sentiment: The market may enter a short-term consolidation phase. Although sentiment has improved, there may still be repeated pullbacks for confirmation. Signs of stabilization should be observed through two points: one, whether trading volume can gently increase; two, whether the previously leading cyclical resource stocks have truly stopped falling. The 4000-point level of the Shanghai index remains a key short-term psychological and technical support.

2. Core Sector Trading Directions:

In a consolidation market, trading should focus on buying low and selling high, emphasizing structural opportunities. Consider the following directions:

1. Technology Growth (Offensive):

1. AI computing power and space economy: Still favored by funds. Focus on optical modules (CPO), domestic computing power, and space energy concepts driven by events, selecting stocks with confirmed orders and performance.

2. AI applications and robotics: If market sentiment continues to warm, stocks with sufficient correction in AI applications, consumer electronics, and robotics may have rotation opportunities.

Within AI applications, a few stocks stand out: Zhejiang Wenhua Media, Shenguang Group, Gravity Media, Yao Wang Technology, Leo Co., Tian Di Online, and some ChiNext stocks (Tianlong, Blue, Yidian). These are recent market hotspots. Not all can hit the daily limit every day, but internal sector rotation creates daily upward demand. Tracking low entries and waiting for explosive momentum is also a good strategy.

3. Cyclical Recovery and Defensive Consumption (Balanced):

Prosperous chemical and external demand sectors, some chemical products are at the cusp of cyclical reversal. Currently, several core stocks like WanFeng Co., BaiChuan Co., HongBaoLi, RunTu Co., HongQiang Co., which I shared last week, have already gained about 35%. Today’s WanFeng Co. is even more promising, indicating a release of market sentiment and potential for further high gains. Large funds are actively participating in intraday relay and shareholding increases, signaling a willingness to go long and aim for consecutive limit-ups under a low sentiment cycle.

Meanwhile, consumer, media, entertainment, and large consumer sectors are expected to perform well toward the end of the year. Those interested in consumption can observe:

Currently, HuangTai Liquor, HengDian Film & TV are leading stocks. Other potential stocks include “Xinhua Department Store,” “MaoYe Commercial,” “SanJiang Shopping,” “QiaQia Food,” and “YouYou Food” for optional monitoring.

Additionally, high-end manufacturing sectors like smart grid equipment and transformers with strong external demand are worth continuous tracking.

Cautiously monitored sectors:

Precious metals and cyclical commodities: International prices remain volatile, and leverage fund clearing is complex. Short-term, it’s advisable to wait and see; avoid blindly bottom-fishing in gold and silver.

The market has shifted from panic to recovery, but before the festival, it may remain volatile. A strategy of “focusing on technology growth and resource cyclical recovery” is recommended. Capture low-entry points during sector rotation, avoid chasing highs, and strictly control positions to manage uncertainties.

4. February 4 Continuous Limit-up Expectations:

1st wave: Zhejiang Wenhua, HongBaoLi, Jiuding Investment,

2nd wave: Zhongchao Holdings, Shunna Co.,

3rd wave: MingDiao Co.

三、After a Major Drop, How to Judge the Bottoming, Stabilization, and Rebound?

1. Volume signals: During the final phase of a sharp decline, trading volume gradually shrinks (panic selling exhausted). On the day of bottoming, look for “shrinking volume with small positive candles or doji,” followed by volume expansion confirming capital inflow.

2. Candlestick patterns: Reversal signals like hammer, dawn, etc., appear, with 2-3 consecutive days without new lows, and closing prices above short-term moving averages (5/10 days).

3. Sentiment and capital: Panic indicators decline, northbound funds and main funds shift from net outflows to continuous net inflows.

4. Fundamentals: No new negative news, policies signal stabilization or industry benefits, and valuations fall back to a reasonable historical range.

5. After the initial sharp decline, rebounds are often “panic recovery.” A second bottom test can verify the support strength of previous lows, avoiding “false bottom” risks. If the second test does not break the previous low, volume shrinks again, and a double bottom pattern forms, the confidence in stabilization greatly increases. If the index directly breaks through the rebound high with volume, it can also confirm stabilization, but beware of “V-shaped” reversals after a one-sided decline, which have lower fault tolerance.

Judging a bottom requires a resonance of volume, price, sentiment, and fundamentals. A second bottom significantly reduces misjudgment risk. Don’t rush to buy the dip tomorrow or the day after; wait for multiple signals to confirm, preferably after strong patterns like “double bottom” are confirmed.

The above is today’s review and tomorrow’s outlook. This is my personal understanding; no stock recommendations are provided. The stock market involves risks; please invest cautiously!

Basic points for novice retail investors to focus on:

Retail trading system logic:

Dragon return and limit-up with double volume negative candles:

Limit-up with double volume negative candles:

Previous high resistance levels:

Short-term volume-price intraday charts:

Break and re-entry upgrade version:

Break and re-entry trading details:

Massive volume negative re-entry details: