This account is pending registration confirmation. Please click on the link within the confirmation email previously sent you to complete registration.
Need a new registration confirmation email? Click here
Stocks Under $10 with 50-100% upside potential - 14 days FREE!

Cramer's 'Mad Money' Recap: Playing a Short-Term Rally

Search Jim Cramer's "Mad Money" trading recommendations using our exclusive "Mad Money" Stock Screener.


(This program last aired Aug. 31, 2012.)

NEW YORK (TheStreet) -- There's nothing worse than watching the averages soar while your portfolio barely moves, Jim Cramer told "Mad Money" viewers Friday. He dedicated the show to the rules for taking advantage of a short-term market rally.

Cramer said that knowing how to approach a rally will definitely make you a better investor because, while it may seem like your portfolio can run itself during a rally, in fact, rallies are the perfect opportunity to lighten up on your positions and take profits.

"You don't have a profit until you sell something," Cramer reminded viewers, which is why he always encourages investors to sell into strength, then use market weakness as an opportunity to buy back in at a lower price. Hang on too long, cautioned Cramer, and risk watching your profits evaporate before your eyes.

The key to approaching any rally, said Cramer, is to look at it with some pessimism, something that shouldn't be hard after years of being held hostage by the financial woes of Europe. Never let "rally euphoria" lead to complacency, he said, because profits can disappear just as fast as they appear.

Don't Panic!

People always want help when the market sells off, Cramer told viewers. While it's normal to panic in the face of losses, Cramer said investors need to reject he notion that people only need help when the market is lousy. Mistakes happen on the way up as well.

Cramer said his first rule for rallies is to be tough on your portfolio during big "up" days. The only time to scrutinize more is in the middle of a big decline with seemingly no end in sight. "Assume everything is guilty until proven innocent," said Cramer, and make each of your holdings prove why it's worth holding.

It's only natural to develop a love affair with stocks that are making you money. After all, they've made you wealthier so of course you're going to want more. But in reality you should like your winners less, said Cramer. For one thing, they've just gotten more expensive and therefore less attractive. When the downside outweighs the upside it's "end of story," said Cramer.

1 of 2

Select the service that is right for you!

COMPARE ALL SERVICES
Action Alerts PLUS
Try it NOW

Jim Cramer and Stephanie Link actively manage a real portfolio and reveal their money management tactics while giving advanced notice before every trade.

Product Features:
  • $2.5+ million portfolio
  • Large-cap and dividend focus
  • Intraday trade alerts from Cramer
  • Weekly roundups
TheStreet Quant Ratings
Try it NOW
Only $49.95/yr

Access the tool that DOMINATES the Russell 2000 and the S&P 500.

Product Features:
  • Buy, hold, or sell recommendations for over 4,300 stocks
  • Unlimited research reports on your favorite stocks
  • A custom stock screener
  • Upgrade/downgrade alerts
Stocks Under $10
Try it NOW

David Peltier, uncovers low dollar stocks with extraordinary upside potential that are flying under Wall Street's radar.

Product Features:
  • Model portfolio
  • Stocks trading below $10
  • Intraday trade alerts
  • Weekly roundups
Dividend Stock Advisor
Try it NOW

Jim Cramer's protege, David Peltier, identifies the best of breed dividend stocks that will pay a reliable AND significant income stream.

Product Features:
  • Diversified model portfolio of dividend stocks
  • Alerts when market news affect the portfolio
  • Bi-weekly updates with exact steps to take - BUY, HOLD, SELL
Real Money Pro
Try it NOW

All of Real Money, plus 15 more of Wall Street's sharpest minds delivering actionable trading ideas, a comprehensive look at the market, and fundamental and technical analysis.

Product Features:
  • Real Money + Doug Kass Plus 15 more Wall Street Pros
  • Intraday commentary & news
  • Ultra-actionable trading ideas
Options Profits
Try it NOW

Our options trading pros provide daily market commentary and over 100 monthly option trading ideas and strategies to help you become a well-seasoned trader.

Product Features:
  • 100+ monthly options trading ideas
  • Actionable options commentary & news
  • Real-time trading community
  • Options TV
To begin commenting right away, you can log in below using your Disqus, Facebook, Twitter, OpenID or Yahoo login credentials. Alternatively, you can post a comment as a "guest" just by entering an email address. Your use of the commenting tool is subject to multiple terms of service/use and privacy policies - see here for more details.
Submit an article to us!
DOW 17,113.54 +61.81 0.36%
S&P 500 1,983.53 +9.90 0.50%
NASDAQ 4,456.0160 +31.3120 0.71%

Brokerage Partners

Rates from Bankrate.com

  • Mortgage
  • Credit Cards
  • Auto
Advertising Partners

Free Newsletters from TheStreet

My Subscriptions:

After the Bell

Before the Bell

Booyah! Newsletter

Midday Bell

TheStreet Top 10 Stories

Winners & Losers

Register for Newsletters
Top Rated Stocks Top Rated Funds Top Rated ETFs