These Risky Stocks, Never Rush to Buy Even on a Rebound

Taiwan's stock market is facing three major challenges this week: earnings reports from tech giants, the Federal Reserve's interest rate meeting, and the settlement of the Taiwan Weighted Index. However, what truly determines whether the market can stabilize is when capital flows back. Recently, the market opened lower and plunged, but gradually rebounded in the afternoon, leaving a clear lower shadow on the daily candle, indicating support at lower levels. Trading volume was around NT$70 billion—still low, but not yet shrunk to the 'choking volume' that signals a complete loss of liquidity. This suggests selling pressure is easing, but the bottom has not yet been confirmed. If the index can repeatedly open low and close high within the support zone, with volume gradually contracting, it may form a second bottom, awaiting direction after event risks subside.

Regarding the Fed, the market widely expects rates to remain unchanged, with focus on whether the post-meeting tone is hawkish or dovish. Earlier geopolitical tensions pushed up oil prices, amplifying inflation and rate hike concerns. As oil prices have quickly retreated, inflationary pressures have cooled. Central banks do not focus on short-term spikes in individual commodities, but on core price trends after excluding extreme volatility. Meanwhile, even if tech giants report better-than-expected earnings, their stock prices may not rise, as market expectations are already fully priced in. Increased capital expenditures also squeeze free cash flow, becoming a double-edged sword for valuation. However, the continued expansion of data centers and procurement of chips and infrastructure by these giants indicates that long-term AI demand has not reversed. The real beneficiaries may still be Taiwan's semiconductor and server supply chains.

More important than predicting index movements is identifying which stocks should not be bought even on a rebound. First are stocks with excessively high margin financing—once support breaks, forced liquidation could trigger a sell-off disconnected from fundamentals. Second are stocks with bearish technical patterns and consecutive losses of quarterly moving averages. Third are those with high P/E ratios and downward-revised earnings expectations, yet still propped up by speculative themes. Fourth are stocks where foreign investors, institutional investors, large individual traders, and major insiders are all simultaneously exiting—the so-called 'four major forces all pulling out.' Rebounds in such stocks are often just opportunities to reduce positions, not signs of trend reversal. Investors must not mistake short-term theme-driven stocks for long-term investments.

The most practical strategy now is to deleverage first, then eliminate weak stocks and retain strong ones, before gradually building positions. Investors don’t need to exit the market entirely, but should reduce margin trading and overexposure to single stocks, preserving cash for rotation. Some assets can also be allocated to hedging instruments like bonds or gold that generate cash flow, reducing volatility impact. For stock holdings, priority should be given to companies with clear industry trends, solid revenue and earnings, and improving institutional and large-holder positioning. AI semiconductors, servers, CPU-related supply chains, and memory stocks after consolidation still have the potential to become leaders again once capital returns. The current phase is a short-term correction, not a full reversal of long-term trends. True success lies not in guessing daily ups and downs, but in preserving capital during risks and staying in the market when opportunities arise.

Recently, Taiwan's market has entered a low-volume consolidation phase, with limited upside and increasing stock divergence. At this stage, the most important thing is not chasing red candles every day, but using the market's pause to conduct a health check on your portfolio: keep what should be kept, replace what needs to be replaced—executing 'eliminate weak, retain strong, and rotate stocks.'

Look at my 'Yen Chao Machine APP'—stocks marked as 'four major forces all pulling out'—I’ve warned about these multiple times.

Take King Yuan, for example. It has fallen from its peak, and its current price has even halved. I repeatedly warned about Innolux and Jinju before their corrections.

Many risks are visible before the fall—not just to professional traders or institutional investors like me, but to anyone following my program.

Right now, I’m guiding members to restructure their portfolios—reducing weak, high-risk stocks and shifting toward those with 'four institutional forces all buying,' stronger trends and positioning, while controlling overall exposure and appropriately allocating to hedging instruments.

Because what truly widens the profit gap isn’t rushing in after a rally, but organizing your portfolio and reducing risk during consolidation. When the next Taiwan stock market upswing begins, we’ll be in a more advantageous position than others.

Unsure whether to hold or replace your stocks? Don’t struggle alone—call now, and let me help you reorganize your portfolio!

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The individual securities recommended and analyzed by our company have no improper financial interests. Past performance does not guarantee future profits. Investors should make independent judgments, carefully assess, and bear investment risks on their own.