Risk of Averaging Down?
I just wanted some Foolish thoughts and feedback about averaging down. One of my holdings, Tata Motors (TTM), has really been holding it down lately. It reached a new 52-week high 3 days this week and continues to surge, seemingly untouched by the barrage of economic reports this week. Jaguar is kicking ass. They're launching Ace in Europe and India. The Nano production is picking up. Most importantly, (!!!) commodities are flat and shouldn't pick up until next year, which will help TTM keep expenses down.
However, if you take a look at TTM's 1-yr chart it seems to rise for a period of 3 months, touch a 52 week high, and then come back about 10%. The beginning of the last upward trend occured about 3 months ago (the 3 month mark is next week) and TTM hit a new 52 week high this week.
I bought at the beginning of the last upward trend and I'm up about 25%. I am totally comfortable with the stock and don't mind holding it for the long term because I really see TTM going up from here in the future. BUT, given the cyclical pattern in the charts I thought maybe I would sell now, wait for it to go to about $20, and put the same amount of money back into it. That would be equivilent to me buying shares at about $16.25 a share vs $17.66 where I recently bought in.
Any thoughts or stories about averaging down or TTM in general? I'd like to hear your feedback.