Stock Market Musings - Stock Rush Mode

Author: Zi Lin Zhu
Publisher:
Publish Date: 2006-09-01
Features:
Arbitrage Limit-Up Stocks
In a certain month of 2004, the question "What are arbitrage limit-up stocks?" had been troubling me. But after meeting Dan Qing, I finally felt happy.
"Have you ever heard someone say you look like Pig?" she asked.
"Pig is who?" I was even more confused, and Dan Qing found it even funnier.
"He's a character from a Japanese animated show."
"How could I watch that kind of thing? That's what kids watch."
"I'm already 25."
"Really? I thought you were 18."
"You're probably not complimenting me, are you?"
"Well, what do you think?"
"How would I know?" Dan Qing smiled, completely unguarded. Her innocence always infected me.
"So, why don't you tell me what arbitrage limit-up stocks are?" I asked as I brought over two small glasses of wine. Dan Qing lifted her sharp chin and said, "I knew you'd let me brainwash you again. Alright, where were we?"
"How will the mid-term trends of stocks that limit up behave?" I added as I passed her the wine.
"There are four mid-term trends after a stock limit ups:
1. Single-sided upward movement after limit-up.
2. Single-sided downward movement after limit-up.
3. Small upward movement followed by a decline after limit-up.
4. Small downward movement followed by an upward movement after limit-up."
Dan Qing didn't finish immediately but looked at her glass.
"The purpose of studying the mid-term trends of limit-up stocks is: If you enter a limit-up stock but don't sell in time, what will your return be if you hold it in the mid-term. We found that single-sided upward movement and small downward movement followed by an upward movement account for 65%, meaning the mid-term trend of limit-up stocks is more likely to go up. Therefore, the performance of limit-up stocks is clearly better than other stocks."
Her silhouette caught my eye—her posture was natural and exquisitely graceful, her gaze ethereal. I couldn't help but ask, "This is your secret trick for limit-up stocks?"
Dan Qing raised her eyes and smiled contentedly. "Of course."
"How can you tell?" I asked slowly, knowing I had plenty of time.
Dan Qing took a sip of wine and said calmly, "Limit-up stocks are the best-performing stocks in the entire market that day. That's exactly the type of explosive stocks we want to focus on. They are also the varieties we need to study with great effort. Why do they limit up? What are the differences between them and other stocks? How much will their volatility be in the future? Should we enter them?"
In one go, Dan Qing raised so many questions that few people know, completely baffling me. If I could understand, if I knew the details, if I grasped the secrets, my dream would come true—how wonderful would that be!
Dan Qing noticed me staring blankly and knew I was daydreaming again. She smiled. I said gently, "Tell me more about your stock-picking philosophy?"
"Of course, I'll tell you many secrets that most people don't know, but the key still depends on you to experience and understand. When holding mid-term positions in limit-up stocks, it's also advisable to refer to the overall market trend and the fundamentals of each stock. As for your stock-picking philosophy, let me tell you about 'buying step-stock' first?"
"Great, great." My heart was buzzing—I had already had this idea, and besides, Dan Qing was someone I could never easily meet again.
"A stock in the 'climbing steps' phase..."