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Cramer reveals the key hitting the jackpot on Bank of America

The question of whether an investor is nimble enough to get back in quickly after selling a stock is one that has plagued Jim Cramer his entire life.

Even selling Bank of America at $23 a share with the intention of getting back in at $20 or $21 is risky. And for a hedge fund manager, they better be good. That is what investors pay them for.

Good trading means knowing when a stock has gone up too much and to leave it alone. And when it goes back down, buy the stock back at lower prices on the bet that estimates will need to come up if the Federal Reserve plans to raise rates, Cramer said.

"Bank of America's shareholder base is not monolithic," the "Mad Money" host said. "You will always have investors, people who believe in fundamentals and listening to the conference call and figuring out what to pay for the stock based on how much the company could earn."

Unfortunately, there is more to Cramer's approach.





Pedestrians pass in front of a Bank of America Corp. branch in New York.
Mark Kauzlarich | Bloomberg | Getty Images
Pedestrians pass in front of a Bank of America Corp. branch in New York.
"The key to being a trader is that you need to assess the thinking of all your other fellow shareholders." -Jim Cramer

Some shareholders care about other things. Some are passive and have no judgment. Others do nothing but trade Bank of America all day.

"The key to being a trader is that you need to assess the thinking of all your other fellow shareholders," Cramer said.

That means taking into consideration other perspectives, not just one's own view of the fundamentals, which is what would matter when investing for the long term.

Those are two very different skillsets.

Right now, Bank of America is stick in no-man's land between the two different groups.

Moving forward, Cramer said Bank of America's stock is not headed back down to $16 or $17, but it could also have trouble going above $23. Right now, there are too many short-term traders who bought it for the quarter and plan to sell before the stock breaks out.

"If you are trying to trade, the ideal moment to get back in would be when these short-termers get shaken out. But predicting this stuff is an art, not a science," Cramer said.

That is why Cramer recommended that if you are not a professional money manager or someone who loves to trade, forget about this entire exercise. Most investors simply aren't nimble enough to get out and back in.

The key, he said, is to determine if you are a passive or active trader, or an owner or investor. He said there will be a better entry point in the future, as long as investors remember that any sell-off is a buying opportunity.


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