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No. of Recommendations: 6
ak4cea,

You can view a stock dropping through its 200-day moving average as a "noodle point:" a time to reflect upon what the problem is with the company. Because there obviously is a problem, it's up to us investors to figure out exactly what it is and whether we can live with it.

Tenet Healthcare (THC), for example, currently trades at about $10.80. It crossed its 200-dma back in September, 2002, when it was trading at a far healthier $45 a share. When it crossed the line, an investor might have realized there were bigger troubles ahead and gotten out.

It is a significantly bearish signal, but one that shouldn't be considered a hard-and-fast "must sell now!" rule. It's a time to re-examine the fundamentals and decide whether there are "problems" you can live with. You may also decide that it is a good time to get out while you decide what is going on.

I'll also note that the 200-dma is the only TA signal that the Fool will even nod its jester cap at. Again, not a must-sell point, but rather one to cause you to dig deeper.

Rich
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