As seen by recent example of Fluorochem, even fundamentally good stocks tend to correct and break expected support levels. Many a times its simply an equation of demand and supply, other times more than meets the eye.
I prefer to buy stocks in above situation once I see signs of strong price reversal. As long as the stock continues to make lower lows and lower highs on daily charts, its difficult to take a call about buying. We do not know how low the stock is going to fall, so its better to wait and be patient before buying even though as you mentioned, its 5-10% higher than bottom. I would even be okay after stock has moved 15-20% higher form bottom. Atleast we need to be sure that a bottom is in place, so that there is confidence while buying.
If I am holding a stock which breaks crucial support, and if I have heavy allocation, inspite of decent fundamentals, I tend to reduce my position to comfortable levels. And once I find uptrend has resumed, I start re loading again. This strategy is not fitting for a pure fundamental investor, but I find it suitable to my style.
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