KLCI today 06/11/2012

An opinion piece...For education,not a buy or sell recommendation...

 Scenario 1 ..Initial capital...Rm 100,000

 Bought 20 lots of Astro at 2.75...ie Rm 55,000 ( exclude brokerage n other charges for simplicity )

Bought 10 lots of Astro at 2.67     .ie Rm 26700

Bought  5 lots og Astro at 2.62......ie Rm 13100

 Bought 2 lots of Astro  at 2.55.... ie Rm  5100

 Total investment cost...................Rm 99,900

Average purchase price.............RM 2.702.... ( under a common scenario where initial purchase consumes 50 % of capital )

Scenario 2.....Initial capital ...Rm 100,000

bght 36 lots of astro at 2.75...ie Rm 99000

Average investment cost .......Rm 2,750

Scenario 3...Initial capital ...Rm 100,000

bght 12 lots of astro at 2.75...Rm 33.000

bght 12 lots of astro at 2.67..  Rm32040

Intend to buy astro at 2.60 ( subject to mkt condition ) another 12 lots

If effected at 2.60 ,total investment cost is 96240 average price is 2.673

REMARKS.......Most retailers are in scenario 2...chances are you will fill panicky and frustrated...wanting to sell off and lick your wounds !

May not be the best decision as you have not taken into account the following.....

a) The counter has a big following and has many institutions who are caught just like you and are probably averaging their price

b) Fundamentals are intact and have strong branding

c ) being a high profile stock and being a giant IPO ,counter will be on radar and has strong ability to rebound strongly when broad

market recovers...

Scenario 3 is ideal and  gives an experienced trader an opportunity to profit in adverse conditions,"correct " a wrong entry point

and chance to look at ongoing trend to effect meaningful averaging.....Scenario 3 may miss out on powerful climbs from start but

the trade off is worth it ( unless and until a bull market takes over ! )

Thank you

Chris Choo