Don't be misled! Timing is everything

Cramer: When to pick stocks
Cramer: When to pick stocks   

The secret to Jim Cramer's success is that it's not just about picking good stocks; it's about when you should pick the stocks.

That is why the "Mad Money" host is always trying to get investors intrigued enough to do the homework. He wants investors to be able to recognize the patterns in context and be able to explain why stocks frequently separate from the company fundamentals.

If you can recognize the patterns, then you won't be faked or fooled when the market becomes insanity.

There are various reasons why the selloff in the beginning of the year occurred, and some of the hypotheses that Cramer heard were just plain ridiculous and not based on fact. So he is weeding through all of the explanations for selling, to separate out all of the ones that smell like a rat.





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When investors get their statements at the end of the year, sometimes they are happy with the appreciation of value in their account and decide to take a few stocks off the table. That makes sense.

"Letting everything ride is rarely a good idea. So, I come out here and explain how that could be a very good reason why the market was down," Cramer said.

Then there are some explanations that are just plain bogus, or too emotional, and could mislead investors.

How about when the market tanked in September on fears of Ebola? Was that rational? No, but Americans had been led to believe that the disease could be caught easily. Turns out the reports were false, and it actually was a great buying opportunity.

Fast forward to January, when the market started off in the red because of oil. But oil has been going down for six months in an orderly fashion, until rumbles were heard of oil companies being in trouble.

"The decline became unquestioned and then self-fulfilling, in the same way that the Ebola-induced decline became self-fulfilling in October. Consider the end of the decline here being the same as the period where we thought Ebola could jump through hoops and get you," Cramer said.

So why is the market rebounding? The "Mad Money" host thinks there are a few reasons.

First was the end-of-year profit taking. Second, the velocity of oil's decline has stemmed for the moment. Third, Europe has finally gotten so bad that it finally rallied when the vicious deflationary number appeared.

Fourth, America is profiting from the lower prices of gasoline. Just look at JC Penney. It reported significantly better than expected numbers and the darned thing flew off the charts.

But "Mad Money" is not just about giving stock picks and telling investors to buy or sell.

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"It's about how, if you buy panic instead of selling into it, and if you sell euphoria instead of chasing it, you do better. You make money," Cramer added.

In the end, Cramer wants to help investors do better than they would otherwise do alone. Many could have done better if they had heeded his advice during the absurd selloff in the beginning of January, rather than succumb to the market's irrational mood disorder.

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