To The Moon

On August 13, the three major A-share indices opened higher but failed to sustain their momentum, with early morning trading characterized by a narrow range. The afternoon session saw a gradual retreat, culminating in a late-session plunge that pushed all three indices into negative territory, breaching key short-term support levels.

On the chart, the Shanghai Composite Index attempted multiple challenges against the 250-day moving average in the morning but failed to gain traction. After 2:00 PM, selling pressure intensified, triggering a sharp decline that resulted in the loss of the 5-day moving average. The Shenzhen Component Index and the ChiNext Index followed a similar pattern, experiencing a rapid sell-off after 2:00 PM. The Shenzhen Component Index fell below both the 5-day and 30-day moving averages, while the ChiNext Index lost its 30-day moving average.

By the close, the Shanghai Composite Index had settled at 3,926.96 points, down 0.5%; the Shenzhen Component Index ended at 14,289.44 points, a decline of 0.87%; and the ChiNext Index finished at 3,586.04 points, dropping 0.45%.

Amid the heightened volatility, trading volume in the A-share market expanded significantly, with total turnover across the Shanghai, Shenzhen, and Beijing exchanges reaching 2.57 trillion yuan, an increase of over 400 billion yuan from the previous trading day.

Sector-wise, innovative drugs, banking, communication equipment, and alcohol beverages saw a rebound, bucking the broader downtrend. In contrast, precious metals, film and television, real estate, and electronic components were among the hardest-hit sectors, leading the decline list.

On the stock front, the late-session sell-off dampened market sentiment, causing a sharp increase in the number of declining stocks. Ultimately, only slightly more than 1,100 stocks across the entire A-share market managed to close in positive territory, with 62 of those hitting the daily upper limit. Conversely, over 4,300 stocks ended the session in the red.

"Before the index weakened, a batch of stocks with recent sharp gains plummeted, showing clear signs of loosening positions. These active stocks, serving as market sentiment indicators, faced concentrated selling, quickly triggering collective profit-taking impulses among short-term traders," Chen Yuheng, a senior investment consultant at Jufu Investment, said in an interview. He noted that while market volume increased, the expansion was more reflective of panic-driven selling pressure during the late-session plunge rather than effective follow-through during the morning rally. "The imbalance in volume structure reveals that after a sustained rebound, onshore funds have grown tired, and the willingness of new funds to enter is weak. At the slightest sign of trouble, profit-taking positions scatter like startled birds, scrambling to exit."

"The rebound's stagnation, leading to loosening positions, combined with insufficient support after gap-filling, suggests that the late-session breakdown could signal a short-term pullback," said Wang Xiaoli, a securities analyst interviewed. "The Shanghai Composite Index's multiple failed attempts to break through the 250-day moving average prompted some cautious funds to gradually sell off. The afternoon pullback filled the gap, but the lack of a rapid recovery afterward, coupled with weak support, caused an outflow of funds. In the short term, with the 5-day moving average breached, the index may continue to seek new support levels, and investors should watch the 10-day moving average."

From a technical analysis perspective, Chen said the market is facing significant resistance in the current zone. Taking the Shanghai Composite Index as an example, after consecutive days of rebound, it has approached the key long-term 250-day moving average resistance level. As an important reference for long-term holding costs, the 250-day moving average is traditionally a focal point in the battle between bulls and bears. Without support from unexpected fundamental factors and sustained new capital inflows, it is extremely difficult for the Shanghai Composite Index to break through this resistance in one go. The afternoon's proactive retreat can be seen technically as an inevitable pullback after a failed upward breakout, aimed at digesting the dual pressure of trapped positions from earlier periods and recent profit-taking, thereby re-accumulating upward momentum.