Every time the stock market rallies hard, like it did this week, Jim Cramer can count on investors to get sloppy and carried away.
"As much as you may like this market, you have to stay disciplined. Remember, discipline trumps conviction," the "Mad Money" host said.
The first sign of sloppiness for Cramer was with takeovers. On Thursday morning, the Financial Times reported that Apple has been in talks to acquire Time Warner. At the same time, Cramer heard chatter that Apple is also eyeing Netflix.
Cramer has advocated for Apple to buy Netflix for a long time. In fact, if he were doing the deal, he would keep Reed Hastings as CEO of Netflix. He also thought Time Warner would be a great match for Apple, as HBO would be great for the company.
But that is no reason to buy the stocks.
"If you bought either Netflix or Time Warner when their stocks were running off the unfounded takeover rumors this morning, you need to get your head checked and call a time out. You need to cool off. Go get an ice cream or something," Cramer said.
That is what Cramer classified as the textbook definition of sloppiness.
Another example of sloppiness was with trading oil. Cramer has repeatedly warned investors since crude was in the $30s that when oil gets to $50 a barrel, it could run out of steam. This is because $50 is the golden price where many cash-strapped oil companies can sell oil futures for a profit and bring in the additional income needed to make payments to the banks.
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In other words, at $50 the supply that has been cut back in the U.S. can start to come back on the market.
"So, if you have been riding oil, buying stocks because you thought you were safe as long as the price of crude went up, you are going to find yourself in a house of pain if I am right about all this new supply," Cramer said.
For those investors that have done their homework and own an oil company, Cramer blesses a buy when the stock goes down.
The essence of sloppiness that Cramer senses in the market right now is to let everything ride. But right now, it could make more sense to take some off the table.
"I want you to look at your portfolio in order to decide what has moved too much so you can ring the register on part of your position. No, I am not bearish. I see plenty of strength out there in tech and finance, the two pillars of this very real, very broad rally," Cramer said.