How should we view the continuation of the resource stocks' surge on March 4th and the institutional rebalancing game the next day?

Good evening, everyone, [Taogu Ba]

This post specializes in identifying rebound breakouts and catching strong stocks, focusing on core themes and predicting mainline logic. Skilled at locking in market directions early. In practice, proficient in using powerful strategies like limit-up volume shadows, large-volume bullish and bearish signals, and breakouts from limit-up gaps to precisely capture early-stage stock opportunities. Has a systematic framework for analyzing volume-price relationships during breakouts, able to clearly identify key cycle points such as initiation, shakeouts, pullbacks, and accelerations through dimensions like volume, chips, and patterns, enabling proactive positioning and trend-following. Committed to using patterned, systematic thinking to develop strong stocks, focusing on capturing main upward waves, and leveraging practical systems to grasp trend markets.

On March 3rd, the A-share market experienced extreme segmentation and volume-driven pullbacks, with all three major indices closing lower. The Shanghai Composite hit a ten-year high during the day before plunging. Trading volume across both markets exceeded 3 trillion yuan for two consecutive days, driven by geopolitical conflicts, expectations for the Two Sessions, and repositioning, leading to intense capital battles. After two days of climax in core themes, signs of divergence appeared today. As March 4th marks a key node for the opening of the Two Sessions, theme continuity, sector differentiation, and capital shifts will be central to trading strategies.

1. Market overview on March 3rd: Volume-driven pullback, a tale of two extremes

The indices surged to 4197, hitting a ten-year high, then retreated. On the stock level, widespread declines prevailed: only 643 stocks rose, while 4,807 fell. The main reasons for the index’s retreat: profit-taking on high-level themes; institutional rebalancing causing capital shifts; geopolitical conflicts fueling risk aversion, prompting funds to move from growth sectors to defensive ones.

Today’s sector divergence reached an extreme, with risk aversion and cyclical sectors remaining the only strong directions. Technology growth stocks all declined sharply:

1. Strong sectors (main themes): Oil and petrochemicals surged 7.08%, with “Three Big Oil” companies hitting two consecutive limit-ups for the first time in history; over 20 oil exploration and service stocks hit the daily limit; port and shipping sectors rose 4.51%, with China Merchants Shipping hitting five limit-ups in eight days, and stocks like COSCO Shipping Energy also hitting the limit; natural gas, led by Shihua Gas, became a high-flyer, driving over 30 stocks to limit-up.

2. Declining sectors (hardest hit): Semiconductors, AI computing power, rare earth permanent magnets, photovoltaics, and other high-flyer tracks collapsed across the board. Rare earths fell over 9%, with many stocks hitting the daily limit; the Sci-Tech Innovation 50 Index plummeted 5.21%, with growth stocks under significant valuation pressure. However, in the late session, Huawei’s computing power segment showed notable activity, reacting to expectations of domestic substitution, with key stocks like Tuowei Information, Kerui Technology, Huasheng Tiancheng, and Chuanrun shares worth关注; these could be focal points for future swing trades.

3. Capital logic analysis: Volume increase does not equal trend reversal. It’s about institutional rebalancing and expectation battles. Yesterday’s gap-up and volume surge reflected large-scale capital addition and rotation in oil stocks, along with anticipation of Two Sessions. Today’s confirmation shows the success of yesterday’s rotation. Volume today is not a market trend reversal but a resonance of three factors: institutional rebalancing, expectations for the Two Sessions, and geopolitical risk aversion. Clear core capital flows:

4. Main funds: Significant net outflows, profit-taking at high levels. The main funds net outflow exceeded 80 billion yuan, mainly selling high-level growth stocks like semiconductors, AI, and rare earths, indicating strong profit-taking intent, which was a key driver of today’s index decline.

5. Northbound funds: Contrarian net inflow of 8.23 billion yuan, focusing on defensive positions. They increased holdings in oil and petrochemicals, banks, and high-dividend stocks, reflecting a “risk-avoidance + allocation” strategy, favoring undervalued blue chips for defense.

6. Institutional funds: Rebalancing and expectation battles. They shifted from high-valuation growth sectors to cyclical and defensive sectors, mainly to hedge policy expectations and avoid high-level theme risks. Their rebalancing caused volume fluctuations.

Today’s volume increase is a structural adjustment, not a market top signal. With the Two Sessions opening imminent and policy expectations still present, the index’s support at 4100 points remains strong. Short-term, expect oscillation and consolidation, with rotation between high and low. After adjustments, growth sectors still have recovery potential, and defensive themes show resilience in the short term.

3. After two days of climax in core themes “Oil + Shipping,” how to handle continuation and divergence tomorrow

The recent two-day surge in oil, shipping, and high-dividend core themes has shown signs of divergence today. March 4th will enter a phase of strong divergence. Judging continuation and managing divergence are key to operations. It’s no longer a blind buy opportunity; improper actions could lead to becoming a bag-holder.

1. Oil and gas chain (main theme): Supported by escalating Middle East conflicts and soaring international oil prices, combined with valuation recovery in China’s estimated stocks, the short-term logic remains intact. Focus on “Intercontinental Oil & Gas” leaders for sentiment feedback. Next are Zhunyou Shares, Heshun Petroleum, China Oil Engineering, and Sinopec Oilfield. The big state-owned oil and oil service giants (the “Three Big Oil”) may continue to rise with inertia, but later stocks following the trend will quickly fall behind. Watch for rotation after the big players peak.
2. Ports and shipping (sub-theme): Logic based on the Strait of Hormuz blockade pushing up freight rates. Leading stocks like China Merchants Shipping, COSCO Shipping Energy, and China Merchants South Oil are recognizable but limited in capacity, making broad capital diffusion difficult. Expect tomorrow’s divergence, with one of the three stocks advancing further. Personally, I hold China Merchants Shipping for two days, as it has the best height and sector position, but from order book quality, China Merchants South Oil is better. Their heights are comparable to the capacity and trajectory of “Chinese Satellites + China Satcom + Beidou” during the space era. If the Strait of Hormuz remains closed for a day, they will maintain height and strength.
3. Tech growth (oversold direction): Short-term valuation pressure, with domestic substitution and Huawei’s computing power being the current focal points. Additionally, AI, power, CPO, and liquid cooling sectors show signs of capital reallocation.
4. Tomorrow’s core theme divergence is highly probable.

If strong divergence occurs, leading stocks will oscillate upward, while lagging stocks may break or plunge. Holders of stocks should reduce positions on high points and focus on leaders; cash holders should wait for dips to buy low. There’s potential for new leaders to emerge, depending on who first hits 4 or 5 limit-ups.

If weak divergence occurs, core sectors remain strong, with only some stocks adjusting. Holders can continue to hold leaders or consider partial profit-taking. If geopolitical conflicts ease and oil prices fall, leading sectors may collectively plunge—though this scenario is less likely.

Regardless of the situation, you won’t be able to buy the top stocks in the first wave. Focus on stocks where funds have already built positions, experienced shakeouts, and are in the acceleration phase—these are the stocks we often mention: stocks that have rebound from breakouts, with active participation from major players, after pullbacks and shakeouts, ready for a second wave of acceleration, likely to become future leaders.

4. Market outlook for March 4: oscillation and recovery, focus on Two Sessions and theme divergence

Expected core support at 4100 points. The index will open high and fluctuate, with resistance at 4130 and strong resistance at 4180. Likely range: 4100–4150 points.

1. Geopolitical uncertainties: Whether Middle East tensions ease will directly impact the continuation of oil, gas, and shipping themes.
2. Policy uncertainties: Signals from the Two Sessions will determine whether funds flow back into new productive sectors and technological growth.
3. Capital flow: Whether northbound funds continue to inflow and main funds stop net outflows will influence market sentiment recovery.

Theme expectations:

Cyclical resources: Oil + shipping + natural gas + methanol, focusing on leading stocks, with divergence expected.

AI technology: Huawei computing power + CPO + domestic substitution + AI power

Chain reaction expectations:

1. First wave to second wave: Ningbo Shipping, Sinopec, Public Utilities
2. Second wave to third wave: Intercontinental Oil & Gas, COSCO Shipping Energy, China Merchants South Oil
3. Third wave to fourth wave: Shihua Gas

The second wave to third wave may see about ten stocks advance, such as “China Oil Engineering,” “Zhunyou Shares,” “China Merchants South Oil,” China Oilfield Services, CNOOC Development, “China Merchants Shipping,” JinNiu Chemical.

Small-cap stocks like Zhunyou Shares and Taishan Petroleum are easier to control. If Intercontinental Oil & Gas doesn’t break the limit, they might continue to lead with one-word boards. Once Intercontinental Oil & Gas hits a limit, they will be eliminated if they lack rotation and further breakout opportunities. Tomorrow’s focus is on rotation and breakout to the third wave.

Reiterating our strongest breakout rebound acceleration model! I’ve mentioned this many times before, and now another such opportunity has appeared. Don’t you love it?

For AI tech, focus on Huasheng Tiancheng, Tuowei Information, Kerui Technology; for AI power, Beijing Kerui, Huayin Electric Power.

Two Sessions theme: Funds are pre-positioning for HALO effects, such as new productive forces, infrastructure, and consumption policies. Look for low-entry points and stealth positions, avoid chasing highs.

Today’s volume-driven pullback is a normal market adjustment—emotional release, fund rebalancing, and theme differentiation—not a trend reversal. On March 4th, as the Two Sessions open, the market will enter a phase of oscillation and strong divergence. Core opportunities remain in oil, gas, shipping, natural gas, and high-dividend defensive sectors. Technology growth stocks await oversold recovery.

Abandon the idea of universal gains; focus on structural opportunities. Control positions strictly, focus on leaders, buy low on divergence, take profits on rallies, and avoid chasing lagging stocks. With the policy window opening, the market will revolve around policy implementation and earnings verification. In the short term, focus on defensive main lines; mid-term, allocate to policy-benefiting growth stocks. Only then can you profit in volatile markets and manage risks effectively.

In this market, it’s not about who runs fastest but who survives longest. Abandon the “chase every rise and cut every fall” mentality. Calmly feel the market rhythm, understand sector rotations, and listen to the battle behind volume-price relationships. Only by establishing a stable, repeatable trading system can you truly navigate bull and bear markets and find your place in this ever-changing landscape.

Slow is fast; steady is progress. Let’s work together.

The above is the market outlook for next week. These are my personal insights and understanding. No stock recommendations are provided. Remember, the stock market involves risks; invest cautiously!