The deep Shenzhen and Shanghai stock market once opened high in the morning with a small rebound, but eventually fell after rising. By 11:30 am, the CSI 300 Index slightly dropped by 3 points (-0.14%). The two important indices affecting the overall market, namely the SME Board Index and Growth Enterprise Market (GEM) Index of Shenzhen, had a greater drop than the overall market in the morning. Currently, the weak trend of the SME Board and GEM indices will exert significant pressure on the overall market.
In terms of the market situation, by 11:30 am, there were only four stocks hitting the upper limit (+10%) in the Shenzhen and Shanghai stock markets. Overall, the individual stock market was not very active, but there were not many falling stocks either, and no stocks hit the lower limit (-10%). The maximum decline of any individual stock was only -5.5%. It can be seen that although there was no sharp fall in individual stocks, there were signs that the upward trend could not be sustained, and there were also signs of weakening in the overall market trend. It should be noted that the recent rise in stocks was mainly due to catch-up gains. However, as the catch-up gains gradually completed, the individual stock market became quieter. If this situation does not improve, the overall market will choose a downward direction.
From a technical perspective, looking at the weekly K-line chart, based on the current index level of the overall market, the hope for a positive close this week will be dashed because the current index level is already below the closing level of last Friday. If the overall market continues to fall this afternoon, the weekly K-line of the overall market will be the first negative line after four consecutive positive weeks, and the adjustment pressure on the overall market has become obvious. In fact, the rebound of the overall market has lasted for more than a month, and many stocks have accumulated significant gains. Therefore, it is normal for the overall market to undergo a short-term adjustment from a technical perspective. However, the degree and duration of the decline cannot be predicted because during the adjustment period, the decline in individual stocks may vary greatly, and the time may also be long or short.
At this stage, strong stocks have shown a downward trend, while the rebound (catch-up gain) of weak stocks is difficult to grasp, and there are also signs that this catch-up gain trend is nearing its end. Therefore, investors should focus on selling their stocks when they reach higher levels, especially those with significant cumulative gains, and should lock in profits.
Therefore, the current trading strategy is: timely liquidation of stocks with large gains to lock in profits, and continued holding of stocks with gains far behind the overall market that have just started their rebound, but attention should be paid to profit-taking at any time.