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Investors must be prepared for a pullback after a big rally, Jim Cramer says

Key Points
  • CNBC's Jim Cramer said the market could be peaking and investors need to ready for a pullback, but he wants to buy stocks "only into weakness."
  • The "Mad Money" host said "the trends driving so much of this tech rally are real and they are long-lasting."
  • "This is the year when 5G networks should really take off, so any company with a decent amount of 5G exposure is going to win," he said.
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Investors should prepare for pullback after big rally, says Jim Cramer

CNBC's Jim Cramer on Tuesday warned investors that stock prices could be on a downward trend over a short period of time.

"I want to buy these stocks, but only into weakness. However, keep in mind that we've run a great deal, so you have to be prepared for an exogenous event that causes a pullback that will give you opportunities to buy at lower, less-expensive levels," the "Mad Money" host said.

After Wall Street posted blockbuster rallies in 2019, the major U.S. indexes have turned in two up days and two down days of trading this year. The Dow Jones Industrial Average slipped about 120 points, the S&P 500 declined 0.28% and the tech-heavy Nasdaq Composite had a light dip.

"I know many people believe that we're about at the level where you have to be a moron to buy stocks up here," especially with U.S.-Iran tensions rising and December's employment report coming at the end of the week that will affect perceptions.

Still, "the trends driving so much of this tech rally are real and they are long-lasting," he said.

On Tuesday, numerous analysts came out with bullish outlooks for various tech stocks, including Micron Technology and Western Digital, Cramer noted.

In Las Vegas, thousands of tech leaders and enthusiasts are attending CES 2020. Advanced Micro Devices and Nvidia executives have revealed that demand is strong for their data center, gaming and inference semiconductors. A positive chipmaker environment is a boon for equipment makers like Applied Materials and Lam Research, whose stocks rose more than 2% on Tuesday, Cramer said.

Attendees are also getting insight into the latest developments in 5G, which touches companies like Skyworks Solutions, Qorvo, NXP Semiconductors and Marvell Technology, the host pointed out.

"This is the year when 5G networks should really take off, so any company with a decent amount of 5G exposure is going to win," Cramer said.

In the digitization area, names like Salesforce.com, Workday, ServiceNow and Adobe are worth buying into weakness, he added.

There's still a shortage in social media stocks, Cramer said, with just Twitter, Facebook and Snap making up that bucket.

Despite the headwinds on the market, "there's hope, [a] hope based on a stronger tech market propelled by great secular growth trends that transcend these worries."

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Investors must be prepared for a pullback after a big rally, Jim Cramer says

Disclosure: Cramer's charitable trust owns shares of Salesforce.com, Facebook, Lam Research, Marvell Technology and Nvidia.

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