Mad Money

Sell strategy used by too few investors

Wavebreak Media / 360 | Getty Images

Sometimes a sell strategy is so obvious, Cramer can almost see you rolling your eyes, right through the TV.

But, after sifting through his own results and finding he wasn't always following this simple strategy himself, Cramer felt it had to be put into words, no matter what facial expressions may follow.

"The rule is very simple," Cramer said. "If you own a stock and it refuses to go higher when the market rallies over several days, you should probably sell it."

A file photo of a Samsung Galaxy Note Edge smartphone
Krizstian Bocsi | Bloomberg | Getty Images

Nothing dense or confusing about that.

And yet, time and again, Cramer finds investors maintain their positions in these situations, especially if the stock is a long-term holding that has generated strong returns.

As Cramer so often says, you can't form an emotional attachment to a stock, even if it has done well by you in the past. After all, it's not where a stock has been, it's where a stock is going that can make you money.

And stocks that don't rally when the rest of the market advances are likely going lower.

"For example, when PC stocks started to falter on big up days in 2008, it was an early sign that the space was facing something greater than a cyclical downswing," Cramer explained.

And even though some of these stocks had generated enormous gains, the strategic move was to sell.

"Ultimately the price action was a sign that smartphones were about to make PC's far less relevant," Cramer explained. Investors didn't know that at the time; but the lack of an advance on big up days telegraphed that something wasn't right.

Cramer said a similar situation developed with steel, mineral and fertilizer stocks in 2007. "There would be days on end when the market would go higher yet these names would either rally very slightly or even do nothing at all. Sure enough, that consistent weakness on up days was a signal that these sectors were in a secular decline."

-------------------------------------------------------------
Read more from Mad Money with Jim Cramer
Cramer Remix: Warning to the skeptics
Cramer: Does Amazon belong on your wish list?
Cramer: Retail stocks run amok
-------------------------------------------------------------

In this case, too, the strategic move was to sell, even though some of these stocks had generated significant gains.

Again, the rule seems so obvious, Cramer almost feels sheepish repeating it. But, it's a rule that could boost your bottom line significantly, and because it can do that, Cramer would shout it from the rooftops if necessary.

"If you own stocks that consistently refuse to rally along with the rest of the market, over multiple up days, you have to sell them," Cramer said. That's all there is too it.

Questions for Cramer?
Call Cramer: 1-800-743-CNBC

Want to take a deep dive into Cramer's world? Hit him up!
Mad Money Twitter - Jim Cramer Twitter - Facebook - Instagram - Vine

Questions, comments, suggestions for the "Mad Money" website? madcap@cnbc.com