I used to averaged down all the time but really don't do it nearly as much as I used to. After a long talk with myself, "I said self" because that's what I call myself, I said " self, why do you keep averaging down when you know you shouldn't"? I said "self, because old habits die hard and I'm a knucklehead".
So I really don't know the stock well enough to give you my opinion on averaging down but in general it's not a good idea. I really had to come to terms with myself as a trader and I may do it now and then but in most cases it's just flat out the wrong thing to do.
Now if you want to call it "buying the dip" than that's a different story. I've learned this is a much better way to average down but you can't "buy the dip" until you get a solid reversal signal on volume. So buying cheaper to average down because you hope it'll come back makes no sense. However, buying cheaper because the technicals tell you it's ready to move and the volume supports it is actually the right way to do the same thing. I know it sounds like the same thing but it's really not. This has worked very well for me and without a doubt was one of the top ten changes I made that helped me improve as a trader because it had a direct impact on my decision making process.
Does this make any sense or does it sound like a big 'ol pile of horsesh*t?
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