Investing in stocks requires following the Party's and government's advice to make profits. Understanding and comprehending the management's speeches is the greatest skill, more important than the ability to read K-line charts. As early as January 19, I published an article titled "Focus on Large Stocks and Let Go of Small Ones to Welcome the Year of the Dragon," emphasizing the investment strategy for blue-chip stocks: "Due to changes in the new stock issuance system, it is advisable to avoid start-up board and high-valuation small and medium-sized board stocks in the short term. The most profitable individual stocks in the new market situation should be mainly blue-chip stocks. Therefore, our strategy needs to change with the times. For a long time, due to serious liquidity shortages, blue-chip stocks have been suppressed, causing their severe undervaluation. Now, policies are shifting, and within a foreseeable period, liquidity will improve significantly. From a technical perspective, many blue-chip stocks have already formed beautiful bottom patterns. Thus, focusing on large stocks and letting go of small ones is an ideal choice to welcome the new market situation of the Year of the Dragon." This once again verifies my keen insight and foresight. Within a foreseeable timeframe, there should be a good wave of momentum for blue-chip stocks. For those blue-chip stocks whose forms have already improved, we need to seize opportunities to layout at low points. If blue-chip stocks experience a wave of momentum, the market will far exceed the 3000-point level (in the 2007 wave of blue-chip momentum, even large-cap blue-chip stocks like CITIC Securities could rise more than tenfold within a year, demonstrating the power of blue-chip stock momentum. That wave also helped the country solve major issues such as equity separation reform, making significant contributions to the development of the real economy in subsequent years). It will be a bull market. From this perspective, the management hopes to drive a bull market, which aligns with public welfare requirements. Since the policy intention has become clear, we should appropriately avoid small and medium-sized cap theme stocks, beware of short-term risks in theme stocks, and quickly layout blue-chip stocks. "Cherish life, stay away from ST stocks." The Shanghai market has consecutively broken the 10 billion yuan single-side trading volume for three days. On the last Friday, it steadily increased to over 12 billion yuan. If the Shanghai market's single-side trading volume continuously stays above 15 billion yuan, that will be an important sign of the start of a blue-chip stock momentum. Now, we should prepare to welcome the arrival of a blue-chip stock momentum.
In terms of news, on the 22nd, the Investor Protection Bureau of the CSRC released a core reminder advocating investing in blue-chip stocks. This was the second time within a week that the CSRC supported investing in blue-chip stocks after Chairman Guo Shuqing of the CSRC recently expressed strong support for blue-chip stocks. Relevant officials from the CSRC's Investor Protection Bureau also stated that in recent years, due to the continuous decline in the stock market, a large number of investors have suffered losses, especially small and medium-sized investors who generally haven't made money. In response, regulatory authorities attach great importance to this issue and are actively studying solutions. In fact, the Chinese stock market owes too much to investors, especially small and medium-sized investors (i.e., retail investors). Moreover, a bullish stock market is absolutely beneficial to national economic development. A bull market benefits the state the most, allowing the government to raise more funds to improve people's livelihood and promote economic restructuring. This should also be the grand intention behind the management's push for a blue-chip stock rally. After several consecutive years of significant adjustments, the A-share market is now at a relatively ideal juncture for a bull market. Chairman Guo's speech has already pointed out the direction of the market, and the Investor Protection Bureau has indicated that they are "actively studying ways to address the issue of a large number of investor losses." Such obvious statements, if not understood by everyone, can only blame themselves for being unsuitable for survival in the stock market. Moreover, Li Daokui, a member of the Monetary Policy Committee of the People's Bank of China, recently emphasized that "In 2012, the Chinese stock market will see good development. The stock market issue concerns the interests of a vast number of investors, and long-term stock market stabilization policies are under consideration by the management layer. Adjustments and fine-tuning will continue for the real estate industry’s development, with restrictions on the number of properties possibly relaxed appropriately. The government should also promote the construction of affordable housing, which absolutely cannot be equated with relief housing. Mechanisms and channels for newly graduated university students to rent houses should be developed, and these houses can evolve into positive assets for local governments, generating considerable value."
To a large extent, this was one of the important reasons for the "surge" in the real estate sector last week. Last Friday, the Shenzhen market broke the six-month line with increased volume due to the collective explosion of the real estate sector. To date, both the Shanghai and Shenzhen markets have successfully stepped on the six-month line as expected. The market's movement this week completely aligned with my analysis last weekend ("A reduction in reserve requirements is expected to boost breaking through the six-month line"), achieving six consecutive weekly gains. Trading volumes have also significantly increased, confirming the breakout of the downward channel since April last year, with the medium-term strength basically confirmed.
On February 26, 2012, Sunday, operation-wise, next week should focus on cautious holding. Based on the market rhythm, adjust sufficiently and absorb at low levels, particularly benefiting from industrial development policies and regional development policies for blue-chip stocks. This reduces short-term risks while not missing out on short-term rotation gains.
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