3.20 Review: Shanghai Composite Hits New Year-to-Date Low, Market Chooses Direction Down, We Choose to Take a Stand on the Sidelines

Tearing through fire and ice! The Shanghai Composite Index hits a new low for the year, while the ChiNext Index reaches a new high against the trend, marking extreme market divergence. Behind the 2.28 trillion decline with increased volume is the unyielding resistance of the power sector and the collective retreat of the chemical industry. Sentiment has reached a freezing point, and the rotation pattern has been completely broken. The overall market trend has shifted from previous turbulence and chaos to a clear downturn. Patience is needed while waiting for the market to stabilize. [Taogu Ba]

Following the Trend
The index continued to decline today, but the Shanghai Composite and ChiNext performed divergently. The Shanghai Index hit a new low for the year, while the ChiNext reached a new high, with a clear divergence. On the other hand, after the Shanghai Index filled the gap in the afternoon, there was no sign of bottom-fishing, and the index continued to fall, closing at its lowest point. The total daily turnover was 22.868 billion yuan, an increase of 1.758 billion, with volume expanding at the close, but panic was not obvious. Technically, the Shanghai Index has clearly broken below the recent trading range, with both candlesticks and moving averages showing a bearish downward trend. The trend is established, and the focus now is on stopping the decline, as recovery seems unlikely.

In terms of themes, power sector differentiation was evident today, with 8 stocks hitting the daily limit, amounting to 12.95 billion yuan in limit-up gains. China Power LiaoNeng hit 5 limit-ups, ShaoNeng Shares 3, China Electric Power Energy and Oriental New Energy 2 each, with 4 first-limit-ups. The collective holding of Yunnan Energy Holdings continued to fluctuate slightly higher amid consolidation.
During the day, stimulated by news of Musk’s team purchasing photovoltaic equipment, the photovoltaic concept saw some movement, with 7 stocks hitting the limit-up, totaling 13.688 billion yuan. Long-term leader Guosheng Technology hit 3 limit-ups in 5 days, and Neng Electric’s first limit-up raised some doubts, with a high probability of rotation.
Yesterday’s performance of computing power, which moved along with power, faltered today, with only Dajiang Da continuing to lead with a straight-up move; all others broke their limits.
Chemical stocks, which experienced a rebound yesterday, continued to retreat today, becoming a clear loss-making sector. Thirteen chemical stocks hit the limit-down, including well-known stocks like Jinniu and Jinzhi.
Overall, under the weak market trend, the previous rotation pattern has been broken. After some themes retreat, it’s very difficult to see opportunities for recovery and rotation.

Emotional Fluctuations
Market sentiment remains at a freezing point. Yesterday, fewer than 500 stocks closed higher; today, only 620 did. The market remains broadly down, still at a low point. Even if it consolidates next week, given the harsh environment, investor confidence is unlikely to be strong, and the market may stay subdued.
Speculative sentiment shows some resistance but remains fragmented. Most sectors are dragged down by the index, with declines dominating. However, power and photovoltaic stocks, stimulated by news, continue to perform countertrend, with positive feedback from group mentality. The loss-making effect is most evident in the chemical sector, which is still experiencing a follow-through decline. This fragmentation also manifests as shrinking positions: consensus-backed stocks become more tightly grouped, while those being phased out are mostly abandoned.

Tomorrow’s Outlook
Yesterday, I mentioned that if the index continues downward along the trend, larger risks should be guarded against. Today, the index moved into the worst-case scenario in the afternoon, with the overall trend weakening significantly. Under bearish pressure, themes will also face greater difficulty.
The contest between electricity and computing power has also resulted today: computing power retreated, while power sector narrowly won. In a weak index environment, internal divergence is obvious. As for photovoltaic stocks stimulated by news during the day, it seems they emerged from the dark during the index decline, with little chance of a breakout. Therefore, future themes will mainly focus on electricity.
In a weak environment, group mentality may become even more pronounced—focusing on collective stocks is easier, and it also serves as a risk hedge.
Next, as the overall trend shifts from chaos to a downturn, and with a lack of suitable conditions for a major rally, the approach should shift from active trial-and-error to a defensive stance, prioritizing safety. Wait for the index to stabilize and then assess the extent of recovery and theme developments.
Falling is not scary; markets are always cyclical. This applies to indices and themes alike. Our role is not to fight the market against the trend but to follow when it’s good and stand aside when it’s bad.

Trading Insights
Today, no new positions were opened; the focus was on contraction.
Resconda opened with a straight-up move, but when it broke the limit, all positions were cleared quickly—about 7-8%. The speed was too fast, and the order was not placed at the limit.
Jinkai New Energy initially surged in the morning, so I reduced my holdings, then bought back around a negative 3% level. During the closing auction, it plunged again, showing weakness.
Yuneng Holdings also surged early, reducing positions, then bought back at lower levels. Both are T+0 trading, with one success and one failure.

Post-market holdings: Yuneng Holdings, Jinkai New Energy.

Data Summary