February 5th: Understand the false breakout and shakeout rebound to avoid getting trapped when buying and missing out when selling!

Good evening everyone. Today I will once again focus on analyzing the logic behind gap reversal and rebound; [TaoGuBa]

The index has once again delivered a surprise today, not a scare (the Paw Patrol did not sell off again). The market’s bullish sentiment shrank and rose, breaking through 4100. The expectation is for a pullback to around 4002 points, with the rebound moving up to approximately 4060;

1. On February 4th, both “AI Hardware and AI Applications” faced major market negative news, causing the largest decline in the tech sector.

2. Space photovoltaic and Musk’s research are related, so the photovoltaic equipment sector broke out with increased volume and a breakout pattern.

3. Coal prices surged mainly due to international circumstances (Indonesia’s coal export suspension, China’s import impact, domestic coal prices soaring).

4. All non-ferrous metals and precious metals opened with limit-downs, starting to release liquidity. Everyone is gradually beginning to forget about this sector.

These are roughly some basic summaries of today.

Recently, many stocks have shown gap reversals and rebounds after rebounds, then continue to strengthen. Here I clarify a key feature: “Rebound does not necessarily mean a limit-up day with a gap,” but rather that after a gap, the upward movement pushes the price above the upper part of the gap’s real body. This pattern must be clear.

Regarding the shakeout after a breakout gap, you need to understand the principle of main force shakeouts, which will solve your problem of “buying and getting trapped, selling and the stock rising”!

Currently, there is no sustained main theme in the market; sectors are rotating rapidly and continuously. Therefore, many stocks hit the limit-up and then gap down. Most chasing after these are trapped. Today, I want to focus on the shakeout and rebound strategy after a limit-up gap (suitable for most main force entries during pullback shakeouts);

Analysis of strategies for shakeouts with large bearish or bullish candles:

How to confirm whether the main force is distributing or shaking out after a limit-up? The simplest method at low positions is to see if the price rebounds within 3 days after the gap. If there is no rebound or support, and the price drops sharply below the bottom of the limit-up, then ignore it.

Only after the main force shakeout, when the price reclaims the upper part of the gap’s real body, can we confirm a restart;

The core position for individual stocks with gaps, especially those with more than 2 gaps, many will undergo shakeouts to release profit-taking. The 3-day trend after the gap is very critical, so I am reiterating this today;

Two types of strong stocks’ shakeout strength comparison (compare core stocks):

1. Stronger shakeout: no volume contraction after the gap + no break of the limit-up high point (gap at a price above the limit-up price)

Logic: Capital absorption is extremely strong, selling pressure is directly absorbed, no need to shrink volume to hold chips. This is a strong shakeout, with quick initiation and explosive power.

2. Slightly weaker shakeout: volume contraction after the gap + no break of key levels (half or one-third of the volume on the gap day, with shorter shakeout duration; one-quarter volume results in longer shakeout)

Logic: Capital is locked in, relying on time to wear down floating chips. The start is slow but the trend is steady, with higher fault tolerance.

3. Confirmed entry point: rebound and stand above the upper part of the gap’s real body.

(After a huge bullish volume shakeout, on day 4, the price stands above the closing price of the gap day, and in the following 3 days, volume remains low, buying on dips along the 5-day moving average accelerates.)

Foster’s volume-reduction rebound, after one-third volume pullback, revisits the breakout platform, and then resumes with increased volume. This model is very important. Most stocks, after a gap, see increased volume, then the main force shrinks volume to shake out, often retracing the previous breakout platform. Many friends buy after a gap and get trapped, then the main force shakes out, and they end up cutting losses.

This explains why you get trapped when buying and see the stock rise when selling.

Why can you catch the second wave of Zhejiang Wenlian?

(This involves stocks that the main force built positions on, then sharply dropped, a deep V reversal.)

February 5th Expectations:

1. AI computing power and AI applications will still explode, but avoid big stocks like CPO and Yizhongtian as much as possible. Recently, many have broken down sharply. Focus more on low- and mid-cap CPO stocks. Based on recent CPO adjustments by institutions and Baishui’s trend, by 2026, this sector will start to be highly regarded amid oversold consumer stocks.

2. Photovoltaic equipment (space photovoltaics), closely related to visits from the Xiaomage team, has already broken out with volume to new highs. Short-term focus on sustainability and core stocks within this sector.

3. The logic of cyclical price increases (chemical industry + consumer price hikes + non-ferrous metals).

1 to 2: Youhao Group, Xiexin Integration, Zhongyedda

2 to 3: Shuangliang Energy Saving, Julisuo Gu

3 to 4: Shun Na Shares

This week, there are no stocks with consecutive limit-ups that then gap down after the first limit-up. You can add them to your watchlist to observe shakeouts and gap rebounds. Using the gap rebound strategy well can also be very effective for low buying points. Avoid chasing high every day.

If everyone likes this post, please give it over 300 likes and 200 comments;

I will find time over the weekend to do an in-depth analysis of gap rebound strategies (platform shakeouts after gaps + relay shakeouts after gaps).

This concludes today’s review and tomorrow’s outlook. These are my personal insights; no stock recommendations are involved. The stock market involves risks; please invest carefully!

Basic concepts for retail investors and beginners to focus on:

Trading system logic for retail investors:

Dragon Reversal and Limit-up with Double Volume Bearish:

Limit-up with Double Volume Bearish:

Previous high resistance levels:

Short-term volume-price intraday charts:

Upgraded gap rebound strategy:

Details of gap rebound strategy:

Details of huge volume bearish rebound: