Chapter Ten: Seizing Opportunity Amidst Turmoil

Chang’an Automobile is a bona fide state-owned enterprise and a secondary subsidiary under the Huaguo Weaponry and Equipment Group, boasting a formidable background.

On February 7, 2009, Chang’an Automobile announced the launch of the second-generation “Yuexiang” passenger car, which began assembly at its Fifth Factory and was first offered for pre-sale in the market of Shan City.

On March 18 of the same year, the Chang’an Yuexiang officially hit the market, releasing four variants: Basic, Comfort, Luxury, and Prestige, with a price range from 53,900 to 60,900 yuan.

“Yuexiang” was Chang’an Automobile’s fourth domestically developed Huaguo brand sedan following the Benben, Jiexun, and Zhixiang models. Its flagship slogan was: attractive design, excellent drivability, and fuel efficiency.

Besides this, Chang’an Automobile’s A-shares and B-shares were simultaneously suspended from trading starting October 10, 2008. At that time, the company announced it was planning significant matters involving major asset restructuring. This trading halt lasted nearly five months, with trading resuming on February 16, 2009.

During this five-month suspension, speculative rumors flooded the market.

Two of the more credible speculations were:

1. Repurchase and cancellation of B-shares.

2. Integration of the downstream automotive parts supply chain.

Many investors are familiar with A-shares and H-shares, but few can accurately explain what B-shares are.

B-shares, formally called Huaguo Currency Special Stocks or domestic listed foreign-invested shares, are those issued by companies to foreign investors but traded within Huaguo’s domestic stock exchanges.

Chang’an Automobile’s B-shares were issued on September 28, 1996, totaling 250 million shares.

Since the domestic capital market was not fully open at the time, B-shares were introduced to alleviate funding shortages and promote domestic enterprise reform and economic growth by targeting foreign capital.

These expectations resulted in very high market anticipation for Chang’an Automobile.

In the first month after resuming trading in February 2009, the stock surged by 75.48%, followed by an additional 13.98% increase the next month, cumulatively rising nearly 89.46% over two months.

This explosive growth in the second month reflected strong sales of the “Yuexiang” model and confirmed the market rumors of the B-share repurchase.

Now, in the third month after resuming trading, the market has fully absorbed the two major positive developments—the B-share repurchase and the significant asset restructuring—leading to a clear divergence in capital flows, which is good news for Zhang Yang.

Why is this beneficial?

Capital divergence indicates sideways consolidation.

True master traders favor sideways consolidation above all else.

What makes the stock market fascinating is precisely the T+0 trading during these consolidation phases—an essential stage for top-level operators.

Sideways trading is relatively fair and offers an excellent opportunity for retail investors to profit.

Because when bottom-fishing, one never truly knows when the bottom has been reached, especially when competing against institutional investors with insider information.

As for chasing highs, institutions and speculative capital have the same privilege of early access.

Sideways consolidation is akin to a bend on a racetrack; speed through the curve is the real measure of velocity.

Of course, sideways trading isn’t about random T+0 trades.

It first requires identifying a support base, assessing capital flow and performance.

Taking Chang’an Automobile as an example, after a five-month suspension, it received two major positives internally, plus government subsidies from the rural automotive stimulus policy, totaling three favorable factors.

Moreover, after the 2007 stock market crash, its share price had plummeted 86.17%, clearly oversold, necessitating valuation repair.

With an improving macro environment and rising demand in commodity markets, future performance prospects were strongly supported.

An 89.46% rise over two months, Zhang Yang believed, represented valuation recovery rather than a market peak.

Another notable point is that Chang’an’s price fell from 24.58 yuan to a low of 3.4 yuan—a drop of 86.17%. After resuming trading in February, a rise of 89.46% brought the price only to 6.44 yuan.

Why such a big difference in price despite similar percentage changes?

Because the base price during the fall was large, so the absolute drop was substantial. Conversely, during the rise, the base was small, so even the same percentage gain corresponded to a smaller absolute increase, leaving the stock price far below prior highs.

Many investors misunderstand this, thinking that if a stock falls 5% today, a 5% gain tomorrow will restore their investment, which is incorrect.

This can be explained mathematically: if the initial price is 1, after a 5% decline it becomes 0.95. To return to 1, it must increase by x percent such that 0.95 × (1 + x) = 1, which solves to x ≈ 5.26%.

In other words, a 5% drop requires a 5.26% gain to break even—explaining why many feel inexplicably at a loss.

Throughout the morning session, Zhang Yang only made two purchases, each worth 50,000 yuan.

When the afternoon session opened at 1 p.m., he continued searching for low points during the consolidation.

Meanwhile, he closely monitored the banking and securities indices.

The banking index represented market stability, while the securities index indicated overall market trends. Any directional fluctuation in these would prompt him to immediately halt trading and wait for clearer signals.

At 1:34 p.m., he bought 100,000 yuan worth.

At 1:52 p.m., another 100,000 yuan.

At 2:30 p.m., again 100,000 yuan.

And in the closing auction at 3 p.m., another 100,000 yuan.

During this process of accumulating shares amid the consolidation, Zhang Yang also traded Jianghuai Automobile shares—selling 200,000 yuan at a high point, then repurchasing all at 2:22 p.m., netting a 1.4% gain.

After the close, Zhang Yang sent a message to Lai Weijie via QQ: "Today’s trading is done."

"I’ll take a look," Lai Weijie responded promptly.

He hurriedly logged into his securities account, switched to the simulated trading platform, and upon seeing a total daily gain of 0.77%, began to doubt Zhang Yang’s abilities.

After hesitating, he messaged: "Yang, only 14 trading days left, and the total return is just 3.96%. Are you sure you can reach 50% total gains?"

Currently, he was 46.04% behind target; averaging 3.28% gains per day over the remaining 14 days was the minimum requirement.

[Zhang Yang]: "Don’t worry. If I don’t make the top ten, I’ll refund the full amount."

[Lai Weijie]: "Alright, brother. I’m counting on you. If you make the professional top ten, I’ll add a 2,000 yuan bonus for your efforts."

[Zhang Yang]: "Rest assured, no problem."

Closing the chat window, Lai Weijie stared at his total portfolio gains, now placing all his hopes on Zhang Yang.

He believed he couldn’t achieve an average daily 3.28% gain without relying on luck-driven breakout trades.

Such breakout trading wasn’t like low buying; mistakes could easily result in five or six consecutive limit-down days—something he dared not attempt lightly.

"Don’t let me down, Zhang Yang," Lai Weijie muttered to himself.

...

On April 2, after market close, all 122 Investment Studies students posted their performance charts in the professional group chat, with the class leader compiling and reporting the results.

Today’s top performer was Wang Liu, who, perhaps sensing his top ten position was threatened, had returned to breakout trading on the leaderboard, achieving a 6% gain—4.2% higher than second place, He Jing.

This breakout moved Wang Liu back into the top five, with a total return of 34%.

Currently, the top ten in the Investment Studies major ranked as follows:

1st: He Jing – 41.2%

2nd: Xu Jiafeng – 37.6%

3rd: Dong Lulu – 36%

...

9th: Yin Shichang – 31.7%

10th: Yu Zhigao – 29.8%

As trading days dwindled, more students leaned toward breakout trading.

But breakout trading was essentially gambling—one step to heaven, one step to hell—and represented the final attempt for those outside the top ten to catch up.