The Nasdaq rallied sharply before pulling back; the rebound has not yet evolved into a reversal.

Since last week, tech stocks have suffered consecutive sharp declines, accumulating a large volume of trapped long positions at elevated levels. When prices re-enter the prior high-volume trading zone, selling pressure from positions seeking to break even and short-term profit-taking is inevitable. Institutional capital is also unlikely to allow these high-level trapped positions to exit quickly, so the market will need further consolidation and pullbacks to absorb the selling pressure.

Although the Nasdaq has now reclaimed the 25,000-point level, it still falls short of confirming a genuine trend reversal. Only if the index subsequently breaks through and firmly holds above the strong resistance zone near 26,000 points can a reversal be further confirmed. Until then, the current move should still be viewed as a corrective rebound following an oversold condition.

Second, avoid haphazardly adding to positions that are deeply underwater; rebounds present an opportunity to optimize your portfolio.

The top priority right now is not to hunt for more stocks, but to properly manage existing positions.

Many tech stocks have already rebounded close to last Monday's highs, placing them right back into the prior dense zone of trapped longs. Major players are unlikely to let all high-level positions exit easily, so further consolidation and pullbacks are likely to continue in order to shake out weak hands.

If your current tech holdings are fundamentally weak and heavily weighted, consider using the rebound to moderately reduce exposure. However, if your positions are in leading names such as Micron Technology, SK Hynix, Lumentum Holdings, or Tower Semiconductor, and your allocation is reasonable, you may retain part of the position for further observation.

Operationally, continue adhering to three key principles: never go fully invested, avoid chasing rallies, and never blindly average down in a downtrend.

$Nasdaq Composite Index (.IXIC.US)$ $Micron Technology (MU.US)$ $Lumentum (LITE.US)$

70K Views