Mad Money

This recurring pattern a buy signal, says Cramer


Jim Cramer has spotted a recurring pattern in the market and when it presents itself, he looks at putting money to work.

That is, "when waves of futures selling bring down the stocks of companies that are doing well and have navigated downturns in the past," Cramer likes to buy.

That may seem counterintuitive. After all the weakness usually stems from a negative catalyst that calls global growth into question.

But Cramer is confident in his strategy and points to the price action in PPG Industries to confirm the outlook.

Alex Slobodkin | E+ | Getty Images

"When the company reported in early February, the number was pretty much perfect on every metric," Cramer said. (If that's not a sign that the company is doing well, what is?).

"However PPG had the misfortune to report right smack in the middle of the worldwide squall," Cramer added.Immediately bears pounced on the stock with sellers confident that the global economy had been called into question.

As it turned out, that was the time to buy. "Time went by and the squall calmed down," After the panic had ebbed, "pros looked more closely at the results. Next thing you know PPG hits a 52-week high," Cramer noted.

A similar pattern presented itself in Eaton.

"When the company reported earnings on Tuesday February 4, the number was widely viewed as disappointing. The stock slipped from the high 70s to the high 60s in pretty much of a straight line," Cramer said.

However, CEO Sandy Cutler came on Mad Money and told Cramer the results shouldn't worry investors. "He said that the outlook for almost every business was improving including construction of all kinds," Cramer explained. (That's an example of a company navigating headwinds with aplomb.)

Investors who bought into the decline, are now enjoying sizable returns. Shares are now a stone's throw from their 52-week high.

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Cramer is seeing the same kind of price action in United Technologies, 3M and Emerson.

"It's no different for any of the big multinationals," Cramer added. If they're good companies, with strong balance sheets, shrewd leadership and promising fundamentals, then the profitable strategy has been to buy into weakness.

Call Cramer: 1-800-743-CNBC

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