The Taipei stock market opened higher on Tuesday, buoyed by positive sentiment from the COMPUTEX technology exhibition, but gains narrowed throughout the session as the market settled into a pattern of high-level volatility. Market observers noted that funds are rotating out of previously strong heavyweight stocks and moving toward electronics sectors that have shown potential after a period of consolidation.

Market Signals Amid the Rotation

While COMPUTEX typically serves as a strong catalyst for AI, server, and cooling-related concept stocks, the Taipei market's early enthusiasm faded as trading volume failed to expand significantly. The lack of sustained momentum has left many investors questioning whether the market is approaching a peak.

Analysts suggest that the current pattern doesn't signal the end of the rally but rather reflects important market dynamics. The "high-level volatility with accelerated rotation" is characteristic of a consolidating market. While this environment presents greater challenges for investors, opportunities remain for those who can accurately track fund flows.

The current market isn't experiencing a broad-based bull run, requiring extra caution from investors. Rather than chasing rallies, market participants should look for opportunities during pullbacks. Analysis shows that while institutional investors remain active, their strategy has shifted toward gradual profit-taking in heavyweight stocks like TSMC (2330-TW) and MediaTek (2454-TW).

Where the Money Is Flowing

Funds exiting heavyweight stocks appear to be rotating into mid-to-high-priced electronics stocks that have recently broken through quarterly moving averages after completing their consolidation periods. GPM (3131-TW) serves as a prime example. When its shares recently dipped below NT$1,000, many investors hesitated. However, as a TSMC supplier with solid fundamentals and completed technical consolidation, the pullback actually presented a buying opportunity. The stock subsequently rebounded above NT$1,100, outperforming the broader market.

Despite overall shrinking trading volume, some NT$1,000-plus stocks continue to shine, including Alchip (3661-TW) and ASpeed (5274-TW), representing the ASIC and AI server sectors respectively. Analysts have identified seven key stocks across three focused sectors that combine fundamental strength, stable ownership structure, and improving technical indicators - making them suitable for gradual accumulation during dips.

Navigating the Robotics Theme

While robotics emerged as a highlight at COMPUTEX, investors should maintain discipline when pursuing this theme. Performance varies significantly within the sector - for instance, machinery component maker Hiwin (2049-TW) has shown relative weakness, suggesting investors might consider reducing exposure.

Strategies for Volatile Markets

In oscillating markets, understanding rhythm proves crucial. Many investors fall into the trap of buying highs and panic-selling during dips, leading to eroding capital. Clear market perspective and disciplined strategy become essential to avoid this destructive cycle. Recent portfolio adjustments by professional investors reflect comprehensive analysis of industry trends, technical improvements, and institutional fund flows rather than emotional reactions.

For investors seeking to navigate current conditions, monitoring institutional activity and focusing on the three highlighted sectors may present opportunities. By identifying stocks with genuine investment merit based on thorough analysis, market participants can position themselves to profit even during periods of heightened volatility.