Avoiding the big drop

bigchart.gif A few weeks ago, many Big Moat investors were caught by Chicho’s (CHS) big opening gap down. Yahoo! (YHOO), another stock that is mentioned often by those looking at Big Moat companies, took a big midday hit earlier this week on their announcement that ad revenues would not meet expectations for the auto and financial markets.

A recent post on the Global Growth Investor website gives two reasons why you should not have had any money in Yahoo! when the drop occurred. Once again, it has to do with investing only with the trend. The advice they give is to not invest in any stock that has a dropping 200 day moving average or a dropping 50 day moving average. Yahoo! had both.

This advice is the perfect tool to add to your Big Moat arsenal when making that final decision of whether you should invest your money. Just remember, even if the stock is trending down it is not disqualified from being a Big Moat company. It just means that a stock you like will soon be on sale!

link via Trader Mike