Trying to find a stock worth buying right now? Jim Cramer is doing the same thing. And he's got a secret.
The "Mad Money" host believes one of the best ways to find a strategic entry point as well as exit point involves monitoring the market and determining a low water mark, when a preponderance of investors will buy, as well as a high water mark, when a preponderance of investors will sell.
That is, "you need to determine where the value guys will start buying on the way down," said Cramer, thinking the stock is just too attractive to pass up." (That's the low water mark.)
Conversely, "you have to think about where even the most bullish of growth guys will start selling," Cramer added, thinking the stock has just gotten too expensive to hold. (That's the high water mark)
By leveraging the buy levels of value investors versus the sell levels of growth investors, Cramer thinks you'll find something akin to a floor of support and a ceiling of resistance.
To calculate these levels, "I use a quick and dirty rule of thumb that's hardly ever let me down," Cramer said. "If a stock has a multiple that's lower than its growth rate, then that stock is probably too cheap for a value investor to let pass by.
And any stock that's selling at a multiple which is twice the size of its growth rate or greater is probably too expensive, even for an investor seeking growth."