We are trimming a large position to take some profits in this overbought market

Published Mon, May 6 202411:49 AM EDTUpdated Mon, May 6 202411:54 AM EDT

We are selling 150 shares of Morgan Stanley at roughly $94.18. Following the trade, Jim Cramer's Charitable Trust will own 1,250 shares of MS, decreasing its weighting to about 3.80% from 4.20%. We like to refer to the Oscillator to help figure out the market's pulse. This technical tool entered the week in slightly overbought territory at 4.45%. As a reminder, a reading of 4% or more means the market is technically overbought, and a reading of less than minus 4% means it is oversold. Our interpretation of an overbought reading is that the market has had a big run in a short period and could be due for a rest. The S & P 500 may be off its highest levels of the year, but the index has made a nice comeback from its lower levels in April, rallying roughly 4% since April 19's close. There have been many times an overbought market continues to rally — late 2023 is a good example —so it's too hard to predict if we'll see a pullback like after the last time the Oscillator was overbought on March 28. But at a minimum, the tool is a good reminder of how it is prudent to take gains along the way — one of our investment disciplines that looked more important than ever during this volatile earnings season. Our discipline on Monday tells us to trim one of our larger positions: Morgan Stanley. Shares of the wealth management and investment banking company are trading near their 2024 high and are within a whisker of taking out its 52-week high going back to July. A rebound in investment banking activity like M & A and initial public offerings has helped the stock recover from its time in the $70s and $80s. But we're still looking for more confidence in the wealth management unit's ability to gather assets toward its $10 trillion long-term goal and expand its margins to 30%. The first quarter's results were a step in the right direction, and the big 3.6% dividend yield and healthy buyback keep us from making a larger sale at these prices. We'll realize a small gain of about 4% on stock purchased in July 2021. (Jim Cramer's Charitable Trust is long MS. 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.