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Cramer: The action in Apple's stock is a lesson on buying into weakness

  • "Mad Money" host Jim Cramer finds that traders tend to give investors buying opportunities when they flee certain stocks.
  • Monday's action in the stock of Apple is a great example of why investors should look to buy high-quality stocks when they decline, the "Mad Money" host says.
  • Cramer also uses Apple's situation to highlight a broader market pattern.

When it comes to investing, CNBC's Jim Cramer maintains one key guideline: when the market gives you a chance to buy a high-quality stock, you must take advantage of it.

"You literally have to take action right into the knee-jerk negativity to get the best buys, and that confuses a lot of people," the "Mad Money" host said.

To clarify the strategy, Cramer turned to the stock of Apple, one of his favorite long term investments. In September, Apple's shares fell from $164 to $150 on worries that the new iPhone would not live up to expectations.

But the stock has recently regained momentum, surging to $159 on Monday. In his search for a reason, Cramer kept hearing that nothing was ever really wrong with Apple, it had just run too much.

Some people also pointed the "Mad Money" host to a research note from Keybanc, which upgraded Apple's shares to overweight from sector weight on the expectation that the $999 iPhone X would boost the company's profits.

"Sure enough, when I got the upgrade, there wasn't anything in therethat we didn't already know: Apple's got good pricing power on its phones, excellent app store growth [and an] ever-expanding service revenue stream," Cramer said. "So why did Apple's stock roar higher then? My conclusion: it never should've been knocked down in the first place."

At the end of the day, Cramer sees Apple's stock as a glaring "dichotomy between the traders and the investors."

Those who trade Apple see it as a below-average technology stock, devoid of earth-shattering products meant to put its competitors to shame. Those who invest in Apple believe in the company's consumer products story, and compared to other consumer products companies' valuations, Apple's is downright inexpensive.

"Based on today's rebound, the investors were right to buy Apple into weakness — they got it for a song," Cramer said.

"This is a very common pattern in this stock market," the "Mad Money" host continued. "The quick money finds things it doesn't like about stocks [and] throws them away. Then the slower money, the investors, use those sell-offs, which seem irrational to them, to get in."

The stock market is constantly offering investors proof of this theory, Cramer said: in the overly punished bank stocks, in consumer product names like PepsiCo, in the drug and health insurance stocks after President Donald Trump's actions to dismantle Obamacare.

The only group Cramer was hesitant to recommend was retail, which was pummeled after Nordstrom postponed going private because it wasn't able to raise the necessary capital.

Amazon is too big of a threat to the retail space that many of the sector's declines could be lasting, the "Mad Money" host warned.

"Here's the bottom line: traders keep giving you gifts when they bolt, and with the exception of the Trojan horse that is retail, I think these gifts need to be taken," he said. "The opportunities [are] just too darned good to pass up."

WATCH: Cramer finds the market's best buys on weakness

Disclosure: Cramer's charitable trust owns shares of Apple, Keybanc and PepsiCo.

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