Sneak Preview: Get the Right Rally Fit

If I had known about this rule when I announced the arrival of the Cramer tech rally, I would have made sure to figure out the precise cause of the rally and then looked over all the stocks I was talking about to be certain that they were levered to the thing causing the rally: product cycles in high-tech gadgets.

Cisco, which makes networking gear, had no exposure to the actual cause of the rally. Microsoft had some exposure to the rally, because its operating systems are in some phones and handheld devices, but it was barely a participant. I should not have written either of these names on my hands, because even though they're generally seen as representing "tech," they weren't levered to gadget product cycles and thus weren't part of the rally.

Especially when there's a lot of money to be made, but even when there isn't, you need to know what you own and why you own it. The Street can be dumb, but it's not so dumb that it will mark up stocks that appear to be associated with a rally but actually aren't. As long as you pay careful attention to the reasons why your stock should go higher, and you make sure those reasons make sense, you won't miss out on another opportunity like the Cramer tech rally by buying the wrong stocks.

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Editor's note: This is one of Jim Cramer's 10 Rules from New Mistakes, New Rules: Ten Lessons From My Bad Calls, a special excerpt from his newest book, Jim Cramer's Mad Money: Watch TV, Get Rich, in stores now. Check back tomorrow for a new excerpt.