Hexun Investment Advisor Feng Lushun: On March 12th, what is the next step for innovative drugs?

Today is March 12th. Let’s analyze the trends of innovative drugs and Hong Kong-listed innovative drug stocks. Many friends are concerned about the future direction of these two sectors. Below, I will provide a technical analysis.

First, from a broader perspective, it is essential to focus on the monthly chart. For any sector to establish a trend-based rally, it generally needs to stay above the 5-month moving average. Currently, both A-share innovative drugs and Hong Kong innovative drug stocks are below the 5-month moving average. This prolonged situation indicates a generally weak market structure.

From the daily chart perspective, A-share innovative drugs have recently rebounded mainly because the index retraced to near previous lows, which previously triggered a rebound. Now, returning to this area has formed a double bottom pattern, also known as a W-shaped bottom. However, there are clear resistance levels above: firstly, the previous gap, and secondly, the 5-week moving average resistance. This means that for a strong upward move, the index must effectively break above the 5-week moving average, which has not yet happened. The moving averages have not yet formed a golden cross, and the MACD indicator is still below the zero line, indicating ongoing weakness. In terms of trading strategy, before breaking above the 5-week moving average, consider high-position selling near the 5-week line and low-position buying near the 5-day line. However, today the index has already broken below the 5-day moving average, showing short-term weakness. Support can be identified by referencing a recent large bullish candle; draw a horizontal line at its midpoint between the open and close prices to mark the short-term support zone.

Turning to Hong Kong-listed innovative drugs, the overall trend is actually weaker than A-shares. It also remains below the 5-month moving average and is constrained by the 5-week moving average on the weekly chart. From the daily chart, Hong Kong innovative drug stocks show a bullish divergence: the stock price made a new low, but the indicator did not confirm a new low simultaneously, signaling a bottom divergence. After this divergence, the index did experience a rebound, but the rebound was limited and ultimately failed to break above the 5-week moving average. For this sector to perform well, it needs time to expand space, and the process may involve setbacks along the way. The key to future strength is whether it can break above the 5-week moving average. Support can be identified by referencing a recent volume-spike bullish candle; draw support zones based on its open and close prices. As long as this support zone is not broken, a gradual bottoming process is possible. Next, observe whether the moving averages can form a golden cross and whether the MACD can turn red above the zero line. Only if these conditions are met can a genuine upward trend be expected; otherwise, it will be difficult to see a strong rally.

(Editor: Zhang Yan)

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