Continue analyzing key points to pay attention to regarding quantitative market analysis in weak market conditions

Currently, in the market, various sectors may rotate. Often when selecting stocks, this situation occurs: stocks bought in the morning show strength in the first 30 minutes of trading, but quickly the market sentiment shifts to other sectors. For example, in the morning: [Taogu Ba]

If you pay attention during the auction to stocks with a top-line pattern such as China Oil Capital, China Power LiaoNeng, Oriental Ocean, then shortly after the opening, the chemical sector indeed sees popular stocks hitting the limit up, representing Sanfangxiang, Chitianhua, Luthianhua, Luhua Technology. However, the good times don’t last long; the chemical sector quickly faces selling pressure; funds immediately switch to other sectors like agriculture, semiconductors, AI, marine economy, etc. In the afternoon, there are movements in oil transportation, and oil and gas follow with pulses.

In other words, based on past experience, one might buy low in power stocks expecting a rebound, such as energy-saving wind power, China Power Construction, China Energy Construction, which open with good low-cost entries and then surge during the auction. But the results often turn out to be traps.

This phenomenon is caused by the fact that power stocks are likely influenced over the weekend by widespread bearish sentiment, which the quant models truly believe as “mass poisoning” bearish narratives. After collecting massive amounts of bearish logic from top traders, the models push stocks to limit down. Sometimes, when these strategies seem to stand out as contrarian, they no longer work well. Why? Because previously, contrarian strategies involved real human traders; now, quant models are machines relying on collected human sentiment.

In the current ecosystem, “contrarian” strategies sometimes become ineffective in a bearish environment where the overall market sentiment is synchronized and resonant with the “bearish” outlook. Quant models don’t care about individual circumstances; after gathering so much sentiment, they push stocks down en masse.

This results in seemingly promising stocks at the open, with low costs and good rebound patterns (like energy-saving wind power), being suddenly sold off due to quant-driven mass liquidation. This downward pressure then drags down profitable sectors like chemical stocks, which open high and surge, but then also face selling.

As a result, some stocks with large volume gains in the morning form a brutal quant-driven distribution line:

Scenes of brutal quant slaughter of stocks:
Below: Green Power

Below: Baichuan Shares

Below: Luhua Technology

Below: Ningbo Construction

These tragic intraday charts, perhaps, are only created by quant funds combined with strong龙虎榜 (Dragon and Tiger List) reactions, forming this unreasonable “waterfall” type intraday decline.

In the past, such intraday declines could only occur after several consecutive limit-ups and acceleration. But now, stocks that hit the first limit, then go 1-in-2, 3-in-3, often show such momentum in intraday charts.

You might say, in the current quant-driven market, chasing high on weak days with shrinking volume and acceleration is extremely tragic!

In my previous post, I clearly warned everyone to avoid catching falling knives with shrinking volume. Today, Luhua Technology experienced such an extreme waterfall decline.

Therefore, in today’s quant market, special attention should be paid to:

1. Whether there was a large amount of bearish sentiment the day before—especially bearish sentiment.
   If the popular stocks in the bearish sector do not meet expectations the next day, there is a real risk of underperformance. In such cases, if you are making profits, it’s better to exit early. When the market is strong, bearish sentiment may appear contrarian, but in a weak market, bearishness is truly bearish.

2. As mentioned earlier, when a sector peaks and accelerates the next day, watch for high-volume exits.
   For example, the chemical sector saw increased conflict over the weekend, with expanded conflicts or news, leading to quant selling at the open. If you have early signals, exit early; latecomers often face high risk of being trapped after intraday plunge and rebound. This is about not chasing expectations.

3. Stocks with more than 3 consecutive limit-ups are rarely traded by anyone now.
   Current market conditions make 3-limit-up stocks rare. The logic of 2-in-3 acceleration is usually quant harvesting. So, avoid chasing consecutive limit-up stocks. But 1-in-2 may not be as popular in intraday reversal. For example, Power’s Jinkai New Energy, which opened with a strong intraday pattern, and after sector correction, actively moved to the red plate to catch the rebound.

Below: Jinkai New Energy

Below: ShunNa Shares

Active strength after core sector adjustment, such as ShunNa Shares succeeding, while Hanlan Shares failed—these are random. This also shows how difficult the market really is.

4. One-word limit-up stocks: take China Oil Capital as an example. It’s a conflict-driven stock, with news that Iran might settle in RMB. When China Oil Capital hits the top line, Hailian Jinhui’s high open during the auction can be watched, but for hitting the limit, the leader stock is better. So, when Hailian Jinhui opens with a gap, China Oil Capital may have a poor limit-up and then rebound.

5. Recent limit-up streaks are very difficult.
   Quant models mostly open with the first limit-up, with very few 1-in-2 weak limit-ups or low-volume breakouts. For example, Wind Power’s Xihua Technology, which was weak all day but self-recovered at the end;
   Chitianhua, a strong trend in the conflict chemical sector, which also experienced a day of weakness before rebounding.

What does this mean? Catching 1-in-2 limit-ups often involves either very low volume or a day of weakness followed by a rebound. So, why take the risk of trying to hit limit-ups with shrinking volume?

Brief overview of the market and some classifications:
The index is very rarely able to “force a bottom” with a “gold needle” approach. I believe that the early morning sell-off, which crushed the previously stabilizing sentiment, caused the index to recover strongly after initial weakness. However, due to the market’s overall weakness, many stocks experienced deep intraday declines, and the market sentiment may be delayed by a day. If the index recovers tomorrow without unexpected weakness, and the overall sentiment stabilizes, the market will gradually recover.

Currently, sector rotation includes AI, conflict chemical, oil & gas, payment methods, aerospace, semiconductors, marine economy, and power.
At present, power, chemical, and AI are the most popular sectors. Since last week’s high in power stocks has pulled back significantly, new faces may appear, so power stocks are better to buy on dips or return to previous popular stocks.

For chemical stocks, which are among the strongest after conflicts, this is a rhythm-based market. If they rise for several days consecutively, there may be a correction. Today, chemical stocks underperformed, so funds rotated into non-conflict sectors like marine economy and AI. Below are some stocks with good trend potential or limit-up stocks in various sectors.

Power: Huadian LiaoNeng, ShunNa Shares.
Currently, both are first limit-up stocks. Power stocks often have multiple limit-ups, so these are the only two to watch for now.

For wind power and recent new stocks like Xihua Technology, which was weak today, the best approach tomorrow is to see a strong oscillation and limit-up after a weak day. If it opens with a big acceleration, the risk is high.

Power trend: Huadian Energy, Jinkai New Energy, GCL Energy (electricity synergy), Hanlan Shares.
Since ShunNa Shares led the rebound, if it’s not too problematic, Jinkai New Energy or Huadian Energy may also show active rebound patterns tomorrow, but whether they can sustain depends on the market.

Conflict stocks:
Limit-up chemical stocks include Chitianhua, Youfu Shares; shipping stocks include China Merchants South Oil, Hainan HNA Technology; payment stocks include China Oil Capital.
Unlimit chemical stocks: Jinniu Chemical, Luthianhua, Jilin Chemical Fiber, Luhua Technology. For oil & gas, focus on Intercontinental Oil & Gas and Shandong Molong. These have good trends and may rebound if chemical stocks recover tomorrow.

AI:
More about continuation, as today’s rotation was relatively strong. If continuation occurs, beware of quant models quickly pulling back and smashing the stocks.
Zhuolang Intelligent, Huashengchang, Annie Shares, 263, etc., ranked by preference based on chart patterns.

------- Final thoughts -------
The overall market is gradually approaching a small rebound point. Be optimistic. Since catching falling knives with shrinking volume is too difficult, it’s better to focus on low positions and lurking strategies.

The previous post received active support, tips, and likes. If you find this post helpful, continue to support with tips and likes. Only then can the post rank higher and motivate more sharing. Thank you all!

Thanks to the support list:
@OldEmptyCity
@GeniusTrader
@Chairman1994
@lywww3002
@DreamsMustComeTrue
@EggsSadness
@WaterFlowingMustPass
@ZhuoYueAI
@SpecialNicesStocks

Thanks to friends who liked and supported the previous post:
@Right22 @lywww3002 @EggsSadness @QiuGe @Qin896644 @LongHuXiaoChuan @HahaZouNi @TuDan @SisiSi @NingxiaFuture @HongTongTong2022 @CocaColaNoCola @IfTomorrowComes @Finder @EscapeTheLeek @TianChengYun @ChongMingChongMing @NoMoreSupermarketRR @MartialArts @WhiteStoneMaster @CutePipi @ShuoLian @ThatMountainThatWaterHey @LowBuyHighSell2024 @JackChen0123 @goflzly @GuchengWanRen @wFireworks @NotLiGe @JunForBeautyNoGuilt @HCS426 @OnTheRookie @YardMaster @MengMianPiPi @ShuoLian @ThatMountainThatWaterHey @LowBuyHighSell2024 @JackChen0123 @LeekWalkers @JustBrowsing @NaturalSelectionMovingForward @Feijing2 @WatermelonBroGood @BusinessAerospace:
Currently, focus on aerospace development, Beidou Star, and Goldwind Technology. This sector is relatively left-side, meaning if a rotation is expected, it’s based on pre-judgment and suitable for anticipatory lurking.