So what exactly do you sell after a rally? There are two groups of stocks that Cramer recommends getting rid of: the good stocks that have had great runs and the bad stocks that managed to go down when the rest went up.

Trim back on the good stocks because, by virtue of their performance, they are now going to be taking up  a larger chunk of your overall holdings and you’ll need to cut back on the shares you own in order to stay diversified. Cramer also likes to sell momentum stocks after a big rally, as they will inevitably lose their momentum when the rally ends. Momentum stocks don’t need to be sold outright, though. Just take some off the table so you’re not in too deep when they lose steam.

What’s worth selling that’s no good? How about anything you planned on selling before the rally. You can sell these in huge increments now that you will be getting such a good price. And then there’s the losers club that is made up of stocks that went down when everything else went up. These stocks are duds and they aren’t going anywhere. They might be causalities of a larger economic problem or they might have something intrinsically wrong with them. But either way, there’s no point in sticking with a stock that loses when everything else is winning.

When a rally hits, Cramer thinks it’s time to sell the big winners, the momentum names, the losers and the stocks you already planned on dumping.


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