We're making two sales due to an overbought market, meme stock froth

Published Wed, Aug 17 20229:18 AM EDT

We're selling 35 shares of Danaher (DHR) at roughly $300.48 each; and 30 shares of Linde (LIN) at roughly $310.45 each. Following Wednesday's trades, Jim Cramer's Charitable Trust will own 450 shares of Danaher, decreasing its weighting to 4.50% from 4.73%; and 270 shares of Linde, decreasing its weighting to 2.75% from 3.04%. We're making a couple of small trims Wednesday morning for two reasons. First, the S & P Oscillator is still stubbornly showing an overbought reading of 6.16% after Tuesday's largely stronger session. As a reminder, any time the Oscillator moves above 4%, the market is technically said to be overbought, which means it could be due for a pullback. Of course, the Oscillator could become more overbought from here, and stocks can always move higher as we have seen in the past two weeks. But at a minimum, we think an overbought Oscillator serves as a reminder that stocks have had a great run in a very short period and could be due for a rest. Our second reason for the trims is that the recent activity in the meme stocks like Bed Bath & Beyond (BBBY) and other highly speculative companies has us concerned that greed has returned to the stocks of companies with low-quality earnings or are unprofitable. The moves in this corner of the market suggest froth is back and we want to be a little more careful when we see this. Even with the market expected to open lower Wednesday, we are making a couple of sales in two stocks that have strongly bounced in the past few weeks. We are paring back our very large position in Danaher, which despite this trade, we continue to like for the long term. Analysts at Bernstein agree with our long-term view. Late Tuesday, Bernstein resumed its coverage on the life sciences company with an outperform rating and a $340-per-share price target. We'll realize a 3% loss on DHR stock purchased in January 2021. As for Linde, we continue to believe this company is a sleeper winner from the Inflation Reduction Act , which was signed into law by President Joe Biden on Tuesday. But we think it is prudent to take some shares off due to the economic challenges in Europe right now. We'll realize a gain of about 24% on stock purchased in February 2021. (Jim Cramer's Charitable Trust is long DHR and LIN. See here for a full list of the stocks.) As a subscriber to the CNBC Investing Club with Jim Cramer, you will receive a trade alert before Jim makes a trade. Jim waits 45 minutes after sending a trade alert before buying or selling a stock in his charitable trust's portfolio. If Jim has talked about a stock on CNBC TV, he waits 72 hours after issuing the trade alert before executing the trade. THE ABOVE INVESTING CLUB INFORMATION IS SUBJECT TO OUR TERMS AND CONDITIONS AND PRIVACY POLICY , TOGETHER WITH OUR DISCLAIMER . NO FIDUCIARY OBLIGATION OR DUTY EXISTS, OR IS CREATED, BY VIRTUE OF YOUR RECEIPT OF ANY INFORMATION PROVIDED IN CONNECTION WITH THE INVESTING CLUB. NO SPECIFIC OUTCOME OR PROFIT IS GUARANTEED.

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