×

Cramer shares his playbook for maneuvering the market sell-off

  • "Mad Money" host Jim Cramer pinpoints the windows of opportunity in the market-wide sell-off and helps investors strategize how to play the decline.
  • The key things to remember are to stay calm, review the stocks you want to buy on weakness, and cross-reference your notes with the market action, Cramer says.

As equities slid from their highs after a brief 100-basis-point dip in the Dow Jones industrial average on Thursday, CNBC's Jim Cramer wanted to reinforce his sell-off strategy.

"That's when you need to be ready with the playbook," the "Mad Money" host said. "That's when you need to go over all your notes that were written in a calmer moment after watching the show about what to buy, your shopping list and how, if you get a pullback that has nothing to do with the merchandise that you want, damaging just the stock but not the company, you should use it to pounce at sale prices rather than being so confused by the fog of war that you panic like everyone else."

As the negative news began trickling in before the bell on Thursday, beginning with an earnings miss from Unilever, continuing with a tepid quarter from SAP and ending with a notable decline in shares of Apple, Cramer felt the sell-off coming.

But every sell-off is different, he said. With the global economy expanding, Cramer cautioned investors against impulsively buying "recession-proof" consumer goods stocks, because their charts only show more pain ahead.

Instead, the "Mad Money" host decided to review his "targets of opportunity" to see if the stocks he has wanted to buy on weakness were indeed pulling back.

Cramer started with the stocks of companies that have recently provided the market with strong fundamental information.

After IBM CFO Martin Schroeter told Cramer on Wednesday that IBM could be on the brink of a major turning point, Cramer first turned to the stock of IBM, but it wasn't pulling back.

Neither were shares of Adobe, which pre-announced a better-than-expected 2018 forecast on Wednesday. "If the stock weren't up that much, it would be a pound the table situation," Cramer said.

Most of the stocks of drug companies just out with earnings, like Johnson & Johnson, were also maintaining their gains.

And, though Cramer's credo on Apple remains "own it, don't trade it," he advised investors to wait several days for the stock to drift lower, and until the news of low iPhone 8 sales faded, to buy.

So Cramer turned to his second wave of targets: stocks of companies that have come out with other positive information, been blessed with analyst recommendations or recently issued strong earnings reports that went largely unnoticed.

"Next up: Abbott [Laboratories], down this morning [after] reporting a fabulous quarter yesterday," Cramer said. "Unfortunately, the discount didn't last past the morning. But if you caught it, hallelujah!"

The FANG stocks, Cramer's acronym for Facebook, Amazon, Netflix and Google, now Alphabet, were also taking a hit as investors took their profits and fled.

But Cramer made a mental note of positive news from Alphabet, which announced that its investment arm will spend $1 billion in a funding round for ride-sharing service Lyft.

Cramer said incorporating Lyft with Alphabet's self-driving system, Waymo, could be a golden opportunity for the tech titans.

This sell-off strategy has served Cramer time and again, with the few exceptions being the crash of 1987, during which stock prices went haywire, and the days of the 2008 financial crisis, when the directive turned into selling whenever you could.

"Bottom line: My battle plan is pedestrian, it is doable and it's well within the ken of anyone who's watching," the "Mad Money" host said. "The 'buy on a pullback' strategy is not a myth, it's just that you need the guts to actually stick with your game plan when everything is getting crushed and everyone around you is panicking. And, repeat after me: nobody ever made a dime panicking."

WATCH: Cramer finds 'targets of opportunity' in the sell-off

Disclosure: Cramer's charitable trust owns shares of Apple, Abbott Laboratories, Facebook and Alphabet.

Questions for Cramer?
Call Cramer: 1-800-743-CNBC

Want to take a deep dive into Cramer's world? Hit him up!
Mad Money Twitter - Jim Cramer Twitter - Facebook - Instagram - Vine

Questions, comments, suggestions for the "Mad Money" website? madcap@cnbc.com