1. The trading volume has shrunk significantly. The trading volume rapidly shrinks with the decline of the market, and there are occasional fluctuations in land volume. However, it is worth noting that if the stock index continues to decline and the trading volume starts to slowly increase after reaching volume, and there is a clear bottom deviation trend between trading volume and stock price, it indicates that the trading volume has been adjusted properly.
2. The stock index has been adjusted in place. In a strong market, whether the stock index has adjusted properly can be measured through wave theory or the golden ratio, but in a weak adjustment, it can only be estimated by observing the market's short selling energy. When the momentum of short selling tends to decline, the index will reach a point where there is no room for further decline.
3. The technical indicators are oversold and in place. It is necessary to conduct a comprehensive analysis and judgment based on multiple indicators that show simultaneous bottom deviations on the monthly, weekly, and daily lines during the same period.
4. Hot spot cooling is in place. The hotspots referred to here refer to the mainstream hotspots in the early stage. The basic adjustment of hotspot sectors will play a role in stabilizing the market center of gravity, and the successful bottoming out of mainstream sectors in the early stage will also help to adjust the market as soon as possible.
The "four in place" indicates that the stock index has basically stopped falling and stabilized in the bottom area, and investors can tentatively build positions at this time. But if investors plan to heavily invest, they still need to wait for the bottom to be completely constructed and the upward trend to be officially confirmed, that is, when the stock index completes the "four breakthroughs" before strategically building positions.
The "Four Breakthroughs" refer to:
1. The breakthrough of the index to the moving average system. The moving average system here refers to multiple moving averages of the market, such as 5-day, 10 day, 20 day, and 60 day. When the index breaks through these moving average systems, investors can focus on and choose some high-quality individual stocks.
2. The breakthrough of trading volume on the moving average system. Due to the different motion characteristics between trading volume and index, the setting of the trading volume moving average system cannot be directly copied from the setting of the index or stock price moving average. There are three moving averages for trading volume, namely the 6-day, 12 day, and 24 day moving averages. When the trading volume breaks through the suppression of these moving average systems, one can actively intervene in the speculation of individual stocks.
3. Breakthrough in hot topics. The hotspots that form breakthroughs may not necessarily be the mainstream hotspots in the early stage. If it is an emerging hotspot sector, breakthroughs are also possible, but hotspots must meet the following characteristics: they must have certain market appeal and financial cohesion, and be able to effectively stimulate and drive market popularity; Hot market trends have the potential to develop in depth and sustainably rise; Hotspot sectors have a circulation capacity that facilitates large-scale capital inflows and outflows; Hot market trends have the characteristics of long duration, no premature differentiation, and frequent switching.
4. Breakthrough in technical indicators. The analysis of the mid-term bottom can focus on the breakthrough trend of the following technical indicators: the golden cross breakthrough trend formed when the K value of the random indicator is less than 20 and the D values are both less than 20. The+DI in the trend indicator DMI breaks through - DI upwards. When the short-term RSI of the relative strength index is below 20 and breaks through the long-term RSI from bottom to top. The 5-day moving average of the William variant dispersion WVAD indicator breaks through the 21 day WVAD moving average from bottom to top.
