Betting on Underdogs and Intraday Pullbacks
On Tuesday, the market went in as an underdog and came out as a champion, with a mid-day turn that ended with the Dow higher by 50 points. On a day where the market was written off by most commentators, Cramer says few people had the trading savvy to see the opportunity in this downturn and use it to their advantage for a buy.
During intraday trading, Cramer didn’t waver. Appearing on Stop Trading this afternoon, he recommended buys of Anadarko and Bank of New York Mellon , even though the market was still down. These two offerings of new stock had already broken the “print” price - the price at which the companies sold the new shares – and Cramer stuck his neck out, telling people to take up some stock on these deals.
So how did the Dow close up 50 points, after a 103 point rally off the day’s lows?
First, Cramer says, when everyone is so negative, the market is simply not going to comply with the bears. Too many people must be in the market for performance and they can’t wait for it to come back. They have to get in, to buy in order to get their results, Cramer says.
Second, the equity offerings are not negative, Cramer says. He points out that Anadarko has been a red-hot stock, but it has a sub-par balance sheet. But this allows them to be opportunistic; they can pay down debt or buy natural gas at depressed prices. Cramer is still a buyer of APC.
And same goes for Bank of New York Mellon and US Bancorp.
With these two banks selling stock down more than ten percent from last week’s highs, both stocks at first failed to hold the offering prices, but that’s when the under-priced opportunity reveals itself and Cramer says you should “swoop in and buy.”
Cramer points out that the same strategy can be employed for Ford’s offering of 300 million shares. Don’t buy on the offering, Cramer says. Instead, wait until others panic, the price drops and then buy.
Finally, Cramer says that this is a market that has suffered at the hands of the “pullbackers,” people who think every decline is the beginning of something big so you should “wait for the pullback” or “wait for the decline to end” before you buy. An extremely unhealthy state-of-mind, according to Cramer.
Instead of holding out for major pullbacks, Cramer says you should continue to be a buyer of stocks that you like when they have modest intraday pullbacks. According to Cramer, the intraday pullbacks are your best bets to get in at a good price. Dips like this include Intel and other tech companies, especially since Intel pre-announced better than expected earnings after the close.
Cramer sees this market as having all of the characteristics of an underdog that must be bet on, not one that is just a ‘flash in the pan.’ What people need to realize, Cramer says, people will realize that there are simply more people who need to get into this market than there are people who need or want to get out. More specifically, this is your chance to buy Anadarko, Bank of New York and US Bancorp came today.
The bottom line: You need to be able to identify pullbacks and equity offerings that don’t at first look like opportunities to buy. Ultimately, there are more reasons to believe in this market than to fear it.
Call Cramer: 1-800-743-CBNC
Questions for Cramer? email@example.com
Questions, comments, suggestions for the Mad Money website? firstname.lastname@example.org