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To: Trader X who wrote (14160)	5/28/1998 7:31:00 PM
From: Robert F. Newton	Read Replies (1) \| Respond to of 17305

TX: What's your thought (technically of course) of the recent pullback in CDO............Does it look like it's a good point to load up the train again? Thanks in advance for your thoughts...... Regards, Bob Newton

To: Trader X who wrote (14160)	5/29/1998 11:46:00 AM
From: Big Brother	Respond to of 17305

>>There's no such thing as "averaging down" or vice versa.<< I've analyzed this term/strategy for some time now. Your argument against its existence is sound, but I think it is interesting why a number of people might not agree with you. Or might agree with you, and do it anyway. There is usually an overriding belief that a stock has a bottom other than zero. Since the stock will always trade above that value (my fingers are crossed here), it is merely volatility which has brought the price down, and it will soon go up. "Averaging down" does two thing: it increases profits and it allows that trader who refuses to take a loss to sell at a lower price. (BTW, that "false bottom" could be "support," TA man). Of course, as you said, these reasons are mere illusions, and the only person who will win with that strategy is the one who finds the second buy is a great deal on its merits alone. Just rambling here. As an aside, I "doubled up" the other day when I went to sell IBM calls and bought instead. Luckily, it occurred to me while driving on the Saw Mill Pkwy that I couldn't remember changing the "Buy to Open" default on my friend's computer. I stopped, called my broker, sold, and made $200 on the mistake. BB