The best time to buy is when a panic subsides. It's better to miss the first 10% of a recovery than to lose 20% catching falling knives. That's what I have learned painfully in 2008. (I just wish hadn't forgotten it by 2011 :)

How do you know that +10% is after the bottom and not a temporary bump on the way down?

I don't, but at that point the fundamentals matter again. The decline isn't self feeding any longer.

Most investors set stop loss levels for themselves. So when a stock crashes through those levels it triggers a lot of sell orders which makes the stock go down more triggering more stop losses, etc. Once the cascade has stopped, the game changes a little bit and fundamentals are reconsidered.

[Edit] And I didn't mean a 10% bounce immediately after the fall, but rather a gradual move up over the course of a few weeks.

You could look at trading volume to determine whether the stock has "settled down". That would at least indicate decreased volatility.