International Defensive Buying Enters, Don't Panic on Mainstream Stocks Pullback! Second-Half Rotation: These Sectors to Lead Catch-Up Gains

The broader market is undergoing consolidation near key technical levels, with futures settlement and position digestion leading to near-saturation valuations in previously strong leading stocks. Profit-taking at higher levels helps preserve capital flexibility. As international capital shifts toward defensive sectors, low-base, lagging catch-up groups are building momentum. Mastering the rhythm of rotation between high- and low-tier sectors offers the best opportunity for strategic positioning during pullbacks.

Support Emerges Near Monthly Moving Average; Positioning Enters Consolidation Phase

The Taiwan stock market opened lower today but found support near the monthly moving average. Although intraday volatility intensified due to Taiwan Index Futures settlement, the key 44,600-point level highlighted by Analyst Zhilin Chen earlier continues to show defensive strength. The weighted index closed down 589 points at 44,719, with trading volume around NT$847.9 billion—below the monthly average. Heavyweight TSMC (2330-TW) also faced pressure, keeping the index in a low-range consolidation. According to proprietary data, the number of strong-performing stocks is now declining, indicating the market has entered a phase of range correction and position digestion. This is not a call for full bearishness, but rather a recognition that after a sharp rebound, mainstream tech stocks have reached relatively saturated valuations in the short term. That’s why Analyst Chen has repeatedly advised this week to gradually trim high-gain positions and maintain capital and position flexibility.

Take Partial Profits from High-Tier Stocks; Capital Shifts Toward Low-Base Sectors

Market capital hasn’t fully exited but is beginning to rotate from high- to low-tier sectors. Recently, international funds have favored defensive sectors, driving buying interest in Taiwan toward relatively underperforming areas such as power semiconductors and passive components. Heat dissipation leader Chi-Alpha (3017-TW) showed resilience today, but the gap between its current price and institutional target valuations is narrowing. Historical patterns clearly show that when the broader market enters a prolonged consolidation phase, high-flying stocks often face profit-taking pressure. Therefore, taking partial profits at elevated levels to secure gains is a more rational approach now—rather than chasing momentum blindly.

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ABF Substrates Pause; Low-Base Semiconductor Supply Chain Awaits Rotation

The ABF substrate sector follows the same logic. Yesterday, Analyst Chen advised taking partial profits on key players like Unimicron (3037-TW) and equipment manufacturer Changwan (7795-TW). Today, both stocks entered consolidation as expected. This isn’t due to a shift in industry trends, but because the system has detected early signs of weakening market structure. Medium- to long-term, ABF expansion plans remain intact, and these stocks will offer re-entry value once they return to fair valuation ranges.

TSMC (2330-TW)-related peripheral equipment and semiconductor consumables, after a period of sideways consolidation, are now showing low-base advantages that could attract rotation capital seeking catch-up gains. The third-quarter strategy remains unchanged: take profits at highs, preserve cash, and re-enter gradually on pullbacks. Short-term volatility is merely position digestion—not the end of the medium-term bull trend. Use systematic analysis, institutional valuation, and position tracking to allocate capital to more favorable risk-reward zones during sector rotation. Investors are invited to download the [Chen Zhilin Analyst App], where real-time updates are shared instantly. Leverage data to master market timing, avoid risks, and capture opportunities with the weekly updated Margin Position Watchlist.

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Source: Analyst Chen Zhilin / Kaixu Investment Consulting

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