Led by big-cap stocks, SSE Composite Index successively stood above 3,300 points this time and didn’t fall below this point. At this moment, atmosphere of the market turned better silently. By the end of closing hours of Thursday, over 30 percent of individual stocks were above the annual moving average. Analysts thought that as index moved up and reached key point over last two months, trading become actively slightly. It also means that the market begins to be bullish from now on. The index is likely to see adjustment amid fluctuation, but the growing trend won’t change in the short run.
The annual moving average usually refers to the 250-day moving average. Generally speaking, if price of an individual stock is above its annual moving average, it means that current stock price is higher than the average cost of stocks held by investors in one year and price of this individual stock will surge. Therefore, the annual moving average is always called as a boundary for bullish trend and bearish trend.
According to statistics from Wind Info, based on the 250-day moving average, by the end of June 30, prices of 737 individual stocks except those going public less than one year were higher than the annual moving average, accounting for about 25.7 percent of total stocks listed in Shanghai and Shenzhen bourses. But this proportion rose to 32.1 percent only two months later. As of closing hours of Thursday, there are more than 930 individual stocks higher than annual moving average, which means that most investors who hold these individual stocks have already earned profits.
The market recovered from the bottom at the end of May and index climbed amid fluctuation, but most of the rising stocks were cyclical stocks and financial stocks. But as turnover of the two bourses in Shanghai and Shenzhen picked up recently, concept stocks attracted a lot of capitals.
Compared with the individual stocks moving above the annual moving average at the two periods, it is undoubtedly that cyclical stocks saw the biggest increase. Nonferrous metal sector showed outstanding performance with over 30 individual stocks higher than annual moving average after late June. Prices of individual stocks including China Northern Rare Earth (Group) High-tech Co., Ltd., Henan Zhongfu Industrial Co., Ltd., Chengtun Mining Group Co., Ltd. and Yantai Zhenghai Magnetic Material Co., Ltd. have climbed by over 40 percent since July. More than 72 individual stocks in late June and over 90 individual stocks as of Thursday were above the annual moving average. These stocks included Shanghai Anoky Group Co., Ltd. and Yibin Tianyuan Group Co., Ltd. which went strong for several days consecutively.
In addition, individual stocks in computer sector whose prices were higher than the annual moving average also saw faster growth. There were more than 20 individual stocks in this sector higher than the annual moving average. As of this Thursday, the figure reached 40, including Yonyou Network Technology Co., Ltd., Thunder Software Technology Co., Ltd. and Westone Information Industry Inc. which showed excellent performance at the end of August. These individual stocks stood above the annual moving average after August and boasted active concepts like driverless driving, artificial intelligence, big data and cyber security.
Many institutions viewed that risk performance was improved recently, and prices of concept stocks rebounded. Therefore, such blue-chip individual stocks in technological sector were favored by capitals, causing their prices to go up.
Interviewees market participants indicated although the index mostly moved around at higher level, nearly 30 percent of individual stocks were above the annual moving average, which indirectly reflected that the market began to be bullish. As turnover of Shanghai and Shenzhen stock exchanges picked up recently and risk preference was improved, they are still rosy about performance of the index in short term, which may fluctuate but its growing trend won’t change.
In the opinion of Orient Securities Company Limited, the SSE Composite Index may hit 3,500 point at most within this year. Although the company is conservative about the medium- and short-term trend, it is not pessimistic about the medium- and long term trend. However, it is unlikely for the index to surge rapidly after exceeding 3,300 points. The overall market still needs adjustment.
Translated by Vanessa Chen
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