A strong rebound, how should we respond tomorrow?

Today the market rebounded sharply after an oversold decline, with a large bullish candle bouncing back half of yesterday’s drop. Most stocks generally rebounded, with over 2,900 stocks gaining more than 3%, accounting for more than half. Is this a rebound or the start of a reversal? How should we respond tomorrow? [Taogu Ba]

Recently, after external influences affected the market, sentiment has been the main driver. The decline was fierce, and the rebound was also strong, resulting in excessive volatility that’s hard to control. Last week, I kept saying there would be a bottom-fishing opportunity by this Tuesday, and today, the oversold condition triggered a rebound.

However, we mentioned that the best scenario is a gap-down opening, which would create an excellent bottom-fishing opportunity. Today, it opened high, so I made some simple additions to my positions without significantly increasing holdings. Since today’s rise was too fast and fierce, if it continues to surge tomorrow, and the short-term rebound is large, we should not chase it. Instead, we should reduce positions appropriately and buy back on a pullback.

Conversely, if tomorrow doesn’t rise and opens lower, then dips further in the afternoon with a rebound, we shouldn’t reduce positions but add back. Or if it falls tomorrow, don’t add then, but wait until Thursday’s rise to buy again.

The stock market is like this—ups and downs. It’s uncomfortable when falling but happy when rising. Choosing to participate in this market means accepting these fluctuations. As long as the trend remains unchanged and you don’t cut losses, most stocks will rebound and reach new highs. The difficulty lies in the present moment because it’s the hardest time now. It truly tests your mindset.

Honestly, I only knew today might present a bottom-fishing opportunity, but I didn’t expect such a strong rebound. My expectation was just a bottoming out and a small doji star to be satisfied, but it exceeded expectations. Still, as I always say, no one can predict the future. I only know that after such a big drop, you can’t cut losses because there will be rebounds. For those who want to cut losses now during the rebound or don’t believe in the market, look for opportunities to do so later.