CEB made new low again today.  A friend asked - should buy more?

Here's my quick reading:

1. Clear Downtrend channel since IPO.  Clear euphoria on IPO day when open at RM1.42.

2. Be skeptical of IPO reported fundamentals - they tend to be "beautified" after 1-2 years have passed.  Not 100% sure about CEB, but with this price action, looks like investors didn't believe in the reported fundamentals.

3. If you draw a channel connecting the bottoms, and pull up the top, you'll see 3 potential bull traps.  3 times.

4. The hard line on the sand was 86 sen support.  This was conclusively broken 2 days ago by the long candle.

5. Second key support at 69 sen based on 2 days was broken again this morning.  

6. When you see intraday price action like this, the hard thing to do, which is the correct thing to do, is to do nothing.   Wait

7. Wait till close of business to see if bull have power to bring it back up above 69 sen.   

• If it closes above 69 sen, then, maybe 50:50 chance the downtrend is over.
• If not, expect more downtrend i.e. "falling knife".

Odds of falling knife?  60/40 IMHO.  Higher than closing above 69 sen.

 So, what should my friend do?

1. Are you an investor or trader?  Why did you enter in the first place?
   
2. If invest, why do you invest?   What's your time frame and what is your target price?
   
   1. E.g. if invest to see reward in 5 years time and target price is 90 sen growing by 15% p.a., then, the most important thing is Position Sizing.  If you have enough, don't add yet even when cheaper.  Wait till falling knife clears.  If already fully sized, do nothing.
3. If trade, what is your trading strategy?
   1. Traders have their stop losses.
   2. They should have backtested their trading system to find a winning "expectancy".
   3. If so, they should follow their rules - I can't generalize nor advice.

Should I average down?

Beginners new to value investing typically thinks like this.  "Many in the internet like the stock.  Many says good things.  It must be a good company.  The cheaper the price, the more I should buy cheap right?  Be greedy when others are fearful?"

1. The key to win in investing in the long run is to not lose money permanently.
   1. Do you know 100% if CEB loss is permanent or temporary?  I don't think anyone knows.
2. If so, when unsure, control the Accumulation of Risk.
   1. You want to not lose the biggest when you are wrong.
   2. Take current size, assume 50% loss, can you stomach it?  If too big, then don't add.  (50% is Buffett's criteria, not mine).
3. My observation on CEB limitations are that when compare to normal blue chip companies (like PBBANK, TENAGA, etc.), it's history is short and unproven.
4. Never exceed your position size limits.      
   
5. If you don't have a fixed limit, consider small like 5% or 3% or 2% capital.   
   1. Need more convincing?
   2. Compare against your other sound stocks like MAYBANK, PBBANK, RHBBANK, TENAGA, etc. if you have them.
   3. Make sure this remains small relative to other stocks.
   4. If you don't have other stocks to compare, keep it below 5% capital.

Summary and Conclusion

As I quickly pen this at lunch at work, price haven't closed yet, so we don't know how market will close today.

If you don't have a position, wait and watch.  

If you have a position, still same advice - wait and watch to make sure it's not a falling knife.​

If you are an investor, take heart - Buffett says that in the short term, Market is a voting machine, but in the long term it is a weighing machine.  If the longer term business performance is truly above average, then, let market calms down first and then re-evaluate to see whether to add (if have space) or do nothing.  

Best wishes.

Disclaimer:  As usual, you are solely responsible for your own trading and investment decision.

Note:  Posted at 2PM