GO
Loading...

Buying High

Tuesday, 19 Jun 2007 | 5:24 PM ET

One of the easiest ways Cramer uses to identify potential picks is simply by watching the new high list every day. Stocks on that list – the highest of the high – have something going for them or else they wouldn’t be there. Either they’re part of a major bull market, or the individual stocks themselves have serious momentum.

Methods to the Madness (pt.1)
Mad Money host Jim Cramer shares the methods to his money-making madness



Most of the stocks on the new high list keep going higher unless something radical changes. But Cramer doesn’t just pluck names of the list thinking they will keep going up. Instead, he likes to wait for a stock to pull back from the new high list. This gives a good, lower-priced entry point in a stock that’s probably going to rebound.

But you need to be confident the stock that pulled back is going to make a comeback, Cramer stresses. Sometimes stocks pull back for good reason because a company is troubled and investors think it’s going down. But more often than not, stocks pull back from their highs because of profit-taking or some kind of panic in the market. As long as the company’s fundamental picture doesn’t change, the stock probably hasn’t fallen from grace. The fundamentals must be intact, or this method won’t help a bit, Cramer says.


Questions? Comments? madcap@cnbc.com

Contact Mad Money

  • Showtimes

    Monday - Friday 6p ET
  • Jim Cramer is host of CNBC's "Mad Money" and co-anchor of the 9 a.m. ET hour of CNBC's "Squawk on the Street."

Mad Money Features

  • Grab the latest CNBC gear from the NBCUniversal Store!

  • Get a behind-the-scenes look at how Cramer formulates his investment advice. "Inside the Madness" is a column, which features e-mails and more with Cramer and his researcher Nicole Urken.

  • You’ve always wanted to hit the “Hallelujah!” button. Here’s your chance.