Jim Cramer considers it his job to make sure that investors don't let Thursday's market bounce lure them into value traps. He sees a ton of value-trap stocks lingering out there, and they could be incredibly dangerous.
A value trap is a stock that appears to be cheap because it has a low price-to-earnings multiple but is deceiving because the actual earnings estimates are too high. So, when the numbers come down, the stock gets crushed.
"This can be a difficult concept for people, since the price-to-earnings multiple or P/E ratio, is the No. 1 metric we use to value stocks and determine whether they are cheap or expensive," the "Mad Money" host said.
Many use the P/E ratio as a tool to figure out what the market is willing to pay for a company's future earnings. Stock prices can vary widely, so the P/E ratio can be considered an apples-to-apples comparison.
To calculate the P/E ratio, investors can divide the price-per-share of the stock by the earnings-per-share.
But be careful.
Typically if a stock has a low P/E ratio, investors view it as being inexpensive. However, there are stocks with incredibly low P/E ratios that can languish for years or even be obliterated.
"Those are value traps and they can fool you if you don't know what to watch out for," Cramer said.
The market took a turn on Thursday, and suddenly half a dozen boxes were checked off from Cramer's market bottom checklist, relieving the worries that were ailing many investors.
"In what can only be described as a pretty amazing 24 hours, a slew of worries were addressed, and even though these positives can be quickly undone, we still got a terrific rally," the "Mad Money" host said.
One positive move that Cramer saw is something he could only describe as a miracle. St. Louis Federal Reserve President James Bullard gave a thoughtful presentation that gave investors reassurance of the Fed. Many realized that the Fed is aware of the impact of the decline in oil to inflation, and that the Fed may not be so heavy handed about rate hikes.
"You don't need all boxes checked. But when the Fed board member who is perceived to be the biggest champion of rate hikes starts to notice that inflation expectations are vastly reduced, then you can pretty much take all the chatter about the urgent need for more rate increases off the table," Cramer said.
So, with FANG stocks finally crumbling, the sell-off making the front page of the Times, a rebound in China and in the price of oil combined with the biggest Fed hawk making a statement — those were the sparks that created the market flame.
Many think that complacency is a disease that only applies to bull markets, but Cramer said that is not true. It is also possible to be too comfortable in negative beliefs about the market, and totally miss a market bottom.
"Complacently negative investors dismissed yesterday's ugly close as just more of the same horrible action. But opportunistic investors? The ones who sense that stocks are getting too cheap and change their view? They look like real winners, at least for the moment," the "Mad Money" host said.
On Wednesday, Cramer confirmed that his charitable trust had purchased stocks in the last hour of trading because the market was so ugly and miserable, it was time to buy. The trust purchased stocks because they had set price levels a long time ago, and those levels were reached.
Cramer did not want to buy the stocks, especially since the market backdrop was so terrible. But he reminded himself that one cannot freeze up and stay negative when a stock hits a price level you set just because it's an emotionally charged moment.
"If you don't buy something when the market is universally and deservedly despised, then when will you buy, especially if you're sitting on a boatload of cash?" Cramer asked
Read More Cramer: How I knew to buy before the big rebound
One stock that soared on Thursday was Alder Biopharmaceuticals. Not only did the entire biotech group roar, but Alder rose a staggering 11 percent. And even though the stock is still down 48 percent from last year's highs, Cramer thinks it could have more room to run.
Alder Biopharma specializes in creating antibody based therapies, with one that includes a promising migraine drug in phase 3 clinical trials, and inflammatory diseases like arthritis that will be in phase 3 later this year.
Cramer thinks this is important because a biotech company with a few drugs in phase 3 is much less speculative than biotechs with an earlier stage pipeline.
To learn more, Cramer spoke with Alder Biopharma's co-founder and CEO, Randy Schatzman.
"I think the thing for your viewers to understand is that the biopharma space is actually never been stronger. The fundamentals are sound; in 2015 it was actually its most productive year… Big pharma is looking to this industry to provide that innovation for their own pipelines," Schatzman said.
In the Lightning Round, Cramer gave his take on a few caller- favorite stocks:
Sunoco: "It's part of a huge agglomeration that is occurring, and I think that you aught to sell, sell, sell because there is other parts of the sector that are better. Use this lift to lighten up."
ConocoPhillips: "They are pledging to keep that dividend. They are pledging. But this oil cannot go in the $20s and for them, I believe they will not be able to make that pledge. But they have a lot of assets to sell. But at 7 percent, I am throwing a red flag because if oil doesn't come back up...they all need capital."