The Second Chapter of the Great Bull: Catching the Major Bull Trend

Author: Huang Jiulong
Publisher:
Publish Date: 2006-05-01
Features: Although I don’t know the stock market friends very well, our shared experiences, similar feelings, and the hardships we’ve endured have brought our hearts together. I’ve seen how investors keep losing money in the bear market, and it makes me feel uncomfortable. I always want to help, but one person’s strength is too weak to cover everyone. Every time a stock investor calls me, I share some trading techniques. Whenever I mention the bear market or bear stocks, I advise investors not to trade bear stocks in a bear market. Don’t blame me for always pouring cold water on you—I’m speaking the truth. What have investors learned in the unforgettable bear market? How many people have been knocked down by the bear market and never recovered? How many people have waited with empty portfolios, finally escaping this disaster? How many people, thinking they’re smart, have repeatedly tried to catch rebounds in the bear market and ended up wounded? Stock trading is a complex and difficult-to-master discipline. Making money in the stock market depends on skills. If you understand the overall trend and trade accordingly, you not only preserve your strength but also make some profits even in a bear market. If you don’t understand the trend or lack a bear market trading strategy, you’ll suffer huge losses.
I remember Xu Xiaonian predicted in 2001 that the Chinese stock market would fall to 1,000 points. At the time, the Shanghai Index was around 1,800 points, and many people said he was crazy, mocking him and dismissing his "1,000-point theory" as something not worth studying or discussing. Now, the Shanghai Index has indeed fallen below 1,000 points. What are the stock investors’ thoughts now? Some regret: "If I had listened to Xu Xiaonian’s advice back then, withdrawn from the stock market, and invested in real estate, how much better it would have been!" Real estate prices are high now too, but the bear market is shifting toward a small bull market. What should stock investors do? This book will provide the answers.
A bear market is a money drain, a bear market is a computer raid, and a bear market is a "revolution" that turns owners into destitute ones. The closer the Shanghai Index gets to 1,000 points, the more terrifying and bloody the bear market feels. "Bear market" and "stock market crash" are synonyms. Only when a stock market crash comes will people realize that "the bird in the nest is not intact when the nest is destroyed."
Regarding the "1,000-point theory," most stock investors’ understanding gradually deepens: they oppose it when the Shanghai Index is at 1,800 points; they don’t believe it will reach such a miserable state at 1,500 points; they think it’s already fallen too deep at 1,300 points, and 1,300 points must hold; by 1,200 points, they believe the government will step in with policies to support the market, and it will never fall to 1,000 points. When it really hits 1,000 points, some are fearful, some are numb, and some are laughing. Did anyone pay attention to the long-term and short-term moving averages of the Shanghai Index at that time? Analyzing the stock market and individual stock trends based on subjective wishes is doomed to fail! When analyzing stocks, one must acknowledge reality, face reality, and study reality. The result of avoiding reality is: the more you resist its fall, the more likely it is to fall to that "dreadful place." Only after personally experiencing the excruciating pain of the bear market—from "Black Monday to Black Monday"—and seeing your wealth reduced by 80% will you realize: "Now, I can only preserve my life and health. The money in the stock market is just external matter. Save as much as possible, cut losses!" This is the tragic state of "cutting off a limb to save one’s life."
Trading in a bear market greatly increases the likelihood of losing money. In a bear market, no matter how skilled or technically proficient you are, even if you win nine times out of ten, one loss could wipe out all your previous gains. If your trading skills are only average, the probability of losing is far higher than winning. Not only will you work hard for nothing, but you’ll end up with a "loss."
Buying stocks in a bear market leaves you constantly worried, fearing a limit-down drop at any moment. If your trading skills are poor, you’ll inevitably lose everything in a bear market. This is because many investors have such a mindset: strong stocks have risen too high—what if they fall? Then, they’ll trade stocks that have already fallen. The prices are low, and they can’t fall much further. As a result, they buy stocks that keep falling. These stocks are far from their "lifeline"—the 120-day moving average on the daily chart—and are half-dead, gradually heading toward death. According to the theory of trading bull stocks, such stocks should be avoided at all costs. Some investors don’t realize how much these stocks have fallen and still buy them, only to get stuck again.
Some investors, regardless of whether stocks are strong or weak, just lie low and don’t move. They think, "Let it be. One day, it will rise." The objective laws of the stock market tell us: "In a bear market, there is no bottom; bear stocks have no bottom." Bear stocks always follow this path: For a long time, the 120-day, 89-day, and 55-day moving averages on the daily chart have been downward. The downward trend has lasted for three or four years. Their movement is: the stock price always stays below the 120-day moving average, and whenever it moves away from the 120-day moving average, it bounces back slightly. Then, the J-line on the daily KDJ indicator hits the top, and it starts falling again. Their path is: rebound—flat—fall—rebound—flat—fall. Practice has proven: when bear stocks are continuously falling, investors absolutely cannot buy them.
Many investors don’t distinguish between bear and bull markets, nor can they tell apart bear and bull stocks. Even in a major bear market, they keep buying and selling tirelessly. The result is repeated failures, and their mentality turns into "repeatedly fighting after repeated failures." Their spirit of wanting to make back their losses and their unyielding determination are admirable, but their account balances gradually shrink, turning into "scrawny" (a Shanghai term meaning shriveled or money decreasing daily). This fulfills the stock market saying: "Trading in a bear market—trade more, lose more; trade more, suffer more."
Some investors simply refuse to believe this, constantly trying to catch rebounds against the bear market. They sail without checking the wind, drive without looking at signals, don’t study the overall market trend, and don’t analyze whether individual stocks are good or bad. Whether it’s a bear or bull market, they trade with full positions, and the consequences are unthinkable!
Stubborn people trade stocks with their hearts in a bull market while their bodies are in a bear market. The result is that they trade more and lose more, turning into losing more and trading more. They don’t turn back even when they hit a south wall, and they don’t turn back even after hitting it again. This trading style must be changed. How can this situation of losing more and trading more, or trading more and losing more, be changed? P3