Bit simplistic but I get what you are trying to say. Few comments though.
Scenario A total cost is $1,400 the 200 share trades net each other out the way you explained it. So he has 1,500 shares that cost $1,400. However current share price is 80c so the value of his holding is $1,200 or a loss of $200. Therefore for this to ring true you need to know you are near a bottom and either your buying or someone elses will pump this back above your average.
Whereas Scenario B might have a cost base of $1,550 but he has shares worth $1,650 or a profit of $100. However getting buyers to push up from here may prove more difficult.
As I said agree with the sentiment and believe that TAW is Scenario A but it's not always simple.
As another aside it's usually buy 50,000 - 100,000 sell 200 not buy 1,000 sell 200. The trades into the bid stack are negligible with regards to their total position.
TAW Price at posting:
19.0¢ Sentiment: Hold Disclosure: Held