Likes Received2024.7.25 Morning Trading Strategy: Internal and External Troubles!! Focus on the rebound of popular stocks/autonomous driving/technology sector
Amid internal and external troubles, the market barely managed to stabilize at 2900 yesterday, only for U.S. stocks to plummet overnight.
The NASDAQ fell 3.64%, marking its largest single-day drop since October 2022 and hitting a new closing low since mid-June. The S&P 500 dropped 2.32%, its biggest single-day decline since December 2022, while the Dow fell 1.25%. Major tech stocks broadly declined, with Tesla plunging over 12% and Nvidia dropping more than 6%.
The main reasons for last night's U.S. stock market crash were: 1) uncertainty in U.S. stock market news, with Trump's position being unstable, and 2) Tesla's Q2 profits falling short of Wall Street expectations.
The company reported adjusted earnings per share of 52 cents for Q2 on Tuesday, below analysts' average estimate of 60 cents, triggering a more than 12% plunge in Tesla's stock. This dragged down the entire tech sector and led to a significant drop in the NASDAQ.
As a result, the market today is expected to experience a follow-through decline, filling the gap near 2870 points.
However, funds began entering to buy the dip near the gap yesterday, and today should see more such activity. Therefore, the likelihood of a rebound after testing the lows is high.
In short: Buying near 2870 points is advisable.
Now, let's look at themes and individual stocks:
1. Rebound of previously popular stocks
Harson has already hit three consecutive limit-ups. Other limit-up stocks, like Kaikai Industrial, Saili Medical, and Shijia Technology, are also former high-momentum stocks in their respective sectors. In weak markets, funds tend to flock here.
When the market weakens, funds often revive previously popular stocks, which may also stimulate a rebound in former high-momentum stocks.
2. Autonomous driving
Among high-momentum stocks, only the sector leader, Dazhong Transportation, remains strong. At this stage, as long as it holds steady or at least doesn't see significant negative feedback, it's positive for the entire sector and market.
As the only theme in the second half of the year comparable to low-altitude stocks, whether autonomous driving recovers today and the strength of that recovery are crucial.
Yesterday saw the first divergence, but it's too early to call it over. For reference, the strongest low-altitude theme in the first half also saw a major divergence after two weeks of strong gains but rebounded the next day, consolidated, and then hit new highs.
3. Broad tech
The domestic self-sufficiency theme hasn't stabilized yet, and chip sector sell-offs on Tuesday night also impacted the sector. Yesterday, Belling opened lower, Shuangle opened significantly lower, and Jinghua continued to be weak, affecting the entire sector. However, a recovery is expected today.
The focus remains on whether the old core [Shanghai Belling] can recover and whether the resilient [National Technology] + [Inno Laser] can continue to strengthen after divergence.
Latest news on domestic AI chips:
1. The Ministry of Industry and Information Technology has found grounds to block Nvidia's H20, citing non-compliance with domestic data center energy efficiency standards. This is 90% likely true.
2. Rumors suggest H20 chips are now barred from customs. Earlier verification indicated more complex review procedures. If this escalates to an outright ban, going all-in on domestic AI chips is recommended.
3. The domestic AI chip market, based on Nvidia's demand, is estimated at 100-150 billion.
4. The reality is that domestic AI chip clusters currently can't handle large language model training (the main compute demand). Most domestic models are trained overseas and fine-tuned locally. Domestic performance and cluster capabilities still lag significantly behind Nvidia, with supply constraints (SMIC's capacity) being another limiting factor.
5. Rumors suggest ByteDance placed an order for 160,000 Cambricon chips, but credibility is low. Even if Nvidia chips are banned, domestic chip volumes won't ramp up quickly, as they're still in the validation phase. However, a ban = major positive, and the stock market may price this in early, valuing it based on potential upside.
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