Cramer's 'Mad Money' Recap: Game Plan How-To

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"You know what you need in a volatile market?" Jim Cramer asked "Mad Money" viewers Friday. "A game plan," he answered.

"Forget the gibberish, and let me show you how to make a game plan," said Cramer, who explaned that he understands how market-players feel about the recent market volatility. "You may feel like throwing in the towel," he said. "You are still scared, and you want to see a bottom to end all bottoms."

Cramer noted that when the Dow Jones Industrial Average dipped Thursday, it failed to break through the bottom reached on Tuesday. "In fact, we bounced off this low heavily," he said.

According to Cramer, that's a bullish sign. "This is called a whoosh," he said. "It means we went down hard and bounced back." It's also called a "crescendo bottom."

"If you need a safety blanket, the crescendo bottom is it," he said. Cramer estimated the odds of its being a legitimate bottom at roughly 50%.

Regardless of whether that turns out to be a solid bottom, Cramer said, investors need to have a game plan.

The first part of the plan calls for investors to spend the weekend ranking their stock holdings into one of four groupings, just as he does for his Action Alerts PLUS charitable trust:

• Ones are the stocks you want to buy no matter what.
• Twos are those you'd buy if they dropped in price.
• Threes are those you'd sell if they moved higher.
• Fours are the stocks you want to sell.

"Come Monday morning, sell all the Fours," Cramer said. It's called "throwing your maidens into the volcano to appease the gods."

"That way, if the selloff continues, you have cash available to buy more Ones."

Another phrase to describe the process is "circling the wagons," he said. "Use the quiet time of this weekend to circle the wagons."