Pre-Market Briefing

Good morning, everyone.

Yesterday, the market rebounded broadly for two reasons: externally, under the influence of Trump’s K-line chart, there was a general decline; internally, the sharp drop on Monday was overdone, creating a rebound demand. However, yesterday’s rebound was accompanied by severe volume contraction. The overall market pattern remains quite unattractive, with the 5-day moving average under significant pressure and a bearish moving average alignment. Even if a bottom is confirmed, it will take about a trading week for the moving averages to level out and form a base. Moreover, the bottom on Monday may not be confirmed and there’s a possibility of further decline. Therefore, if the market opens higher today, be cautious of profit-taking after the surge; a decline might be the real focus.

Regarding market sentiment and themes, sentiment was boosted by the rally of Huadian Liaoning Power, with a lot of speculative trading in the late session. Since there was no threat of suspension overnight, that’s a positive sign. We should observe whether funds are willing to continue pushing higher. From a sentiment perspective, I don’t see the market as bearish; if the main index continues to decline, the crowding into certain stocks could persist. If the main index stabilizes, there’s also a chance for some stocks to lead ahead of the market. It all depends on how funds choose to allocate.

As for the theme, yesterday morning’s trading centered around Huadian Liaoning Power’s attributes. After Shao Neng shares recovered, the sector started to heat up. I believe electricity is the main theme, but it’s still premature. Yesterday’s gains were mainly driven by the “Neng” (power) stocks, and the 20cm and 30cm elastic stocks didn’t keep pace, indicating that the rally might be limited to arbitrage around leading stocks. Based on yesterday’s trend, the sector is expected to differentiate today. If it can continue to diverge and then flow back, the sector’s strength will be evident. Key stocks like Yunnan Energy Control and Hangzhou Electric, which are sensitive to previous highs, can help judge the sector’s direction.

The computing power sector follows a trend-based approach, heavily influenced by external factors. The rallies are mostly driven by small groups, with different stocks leading each day. It’s not suitable to chase these pulses, as their strength is weaker than the electricity sector. Focusing on the moving averages and quietly accumulating core stocks within certain sectors offers better value. $Huadian Liaoning Power (sh600396)$