When the stock price starts at a low level and shows two to three consecutive limit up periods (often a short limit up), it continues to open at the limit up price, and shareholders sell their stocks due to huge profits in the short term, making the daily candlestick a small bearish candlestick (preferably with a longer lower shadow), while the trading volume reaches historical highs, with a turnover rate of over 20% for the day. This is a typical K-line pattern where the dealer raises the purchase price. Once this pattern is discovered, investors can boldly participate.
The key points of this method are: (1) It is best for this pattern to appear after two to three limit up periods, or for a high-level bearish candlestick to appear near historical trading intensive areas. This means that the selling was very heavy on that day; (2) To release historical records, the daily turnover rate should exceed 20%, the larger the better; (3) It is best to have a longer lower shadow line, indicating that in the midst of intense selling, buying is still very strong; (4) It is best to open on the daily limit up board. Although the closing price did not close at the daily limit up board, it is still much higher than yesterday's closing price, indicating that multiple parties still have an overwhelming advantage. If all four of the above conditions are met, it is a true big market, where you can enter with heavy positions and hold in the middle line, and there will be substantial returns.
Classic examples of this method include the variety show stocks in late May 1999 (600770) and Shanghai Sanmao (600689), which reflect the market makers' eagerness to purchase goods. The market makers caused the stock price to skyrocket by 30% in just a few days by continuously jumping short and hitting the limit up. The vast majority of shareholders could not resist the temptation of such short-term profits and sold their stocks. At the same time, off exchange investors were also unwilling to chase after the high price due to the large short-term increase in stock price. Since everyone is selling and afraid to buy, who is buying the daily volume of over 20% of the turnover on that day? Naturally, it is the market makers who are pushing up their purchases, and there are big themes behind these stocks. Variety Show Co., Ltd. is a large-scale player in the internet industry. When it hit a huge bearish candlestick on May 26, 1999, the stock price was only over 15 yuan. However, in September, the stock price has risen to over 50 yuan (compound price), more than tripling.
When using this method, it is important to note that it is more credible for this pattern to appear during the early stages of the overall market rise, when individual stocks have not increased significantly. If the overall market has already experienced a significant increase and individual stocks have more than doubled their gains before experiencing this pattern again, it is actually an opportunity to sell, because at this time, the popularity is high, and market makers may use a huge volume to achieve the goal of selling, such as the performance of Shaanxi Changling (0561) in late June 1999.
In the future, it is important to pay attention to stocks that suddenly experience a gap and limit up. If there is a continuous gap and limit up after a long period of sideways bottoming, followed by a large bearish candlestick, and the market is also in the early stages of an upward trend, then this stock is most likely a dark horse. This pattern is more powerful than three consecutive limit ups, but less common.
Another thing to note is that it is best for less popular stocks to start from the bottom and exhibit this pattern. If a popular stock with such a huge bearish candlestick appears in front of everyone, it is likely that the market makers are selling. In addition, do not immediately buy after discovering this pattern, but observe the stock price trend in the following days. If the stock price continues to rise strongly in the following days, it can catch up; If the stock price weakens significantly in the following days, and the trading volume noticeably shrinks, and all high-level pursuers are trapped, then the stock's future prospects are not optimistic and it is not worth participating in.
