Avoiding the Knife

I am fully invested here, following my DDD purchase. I was going to average down in AMBA, but decided against catching the falling knife, in favor of grabbing onto a rocket ship. With today’s move in AMBA, I am down 10% on the position. This is where I draw the line, typically, deciding whether to double down on the position or cut my losses.

It’s important to consider the condition of the overall market, when assessing risk. I view the current sell off as superfluous and without teeth. Therefore, as logic dictates, the greater the percentage loss in a high beta name, the more likely it will spring higher when the rebound commences.

We are waiting for the Fed minutes and I’d be shocked, SHOCKED MIND YOU, if they are bearish for stocks.

Nonetheless, this is the weird time of the year for stocks and anything can happen.

In short, during period of duress, it’s important to analyze risk and determine whether averaging down is “worth it.” By that I mean, is XYZ a core position or a trade? If it’s the latter, you might be better off allocating money elsewhere. I love corrections because it allows me to own quality stocks at discounted prices. Now is the time to discard the trash, in favor for “good” stocks.