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Jim Cramer: Wait for the All-Clear

NEW YORK ( Real Money) -- Here's what happens next. The analysts, who have watched their high-multiple stocks get wrecked, soon won't be able to take it anymore. They'll get tired of the phone calls. Tired of playing defense. They won't want to be on the hook for BioMarin Pharma (BMRN) -- notice the Goldman downgrade last night? -- or Concur Tech (CNQR) or Isis Pharma (ISIS). They know that the gains are going away and they simply can't take the pain.

So they'll downgrade.

At the same time, the short positions, which hadn't been that big, grew by leaps and bounds Monday and Friday -- so the base is in for the downgrades. We could get a combination of an aggressive wave of selling, plus some short-covering, and then some intraday upgrades that work. Not yet, though. We need to lose adherents in order to get bottoms.

Right now the analysts are panicked. They are trying to figure out what to say -- what could reverse the waves of selling. They realize now that they should have downgraded before. They know they missed the top. But they look at where the stocks have gone year over year, and they notice that they are still up on their recommendations and they figure: Why not pull them? There are no real catalysts that they can see that would turn these around.

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This is all part of the bottoming process that we have seen time and again in the momentum stocks. At a certain point -- not until you get that action that comes from a knockdown by a downgrader -- comes a whoosh in which volume expands, clearing out all of the sellers of which to speak. Then the stock trades up to where it opened and then even higher, closing nicely in the black. That's the sequence. When that happens the next day? You get a gap up from the get-go as everyone seems to realize at once that the panic has occurred and the sellers are done.

What's unfortunate right now is that the sellers simply can't seem to finish up and there's no real panic. The stocks get pounded, and then they come back from the low but not enough to get in the black. That just emboldens new sellers tomorrow, as all of these managers know the same thing I know.

Without the downgrades, you run the risk of having a stock rally ever so slightly, followed by a downgrade that will rip your face off. That's why it is always better to wait for the all-clear that the downgrades generate.

Now, I think there are a handful of high-multiple stocks that won't be downgraded, and I include Priceline (PCLN) and TripAdviser (TRIP) in these. They can go down, but the analysts aren't going to desert them. Those are the first two I would recommend picking at today if you have done no buying.

The rest? Let's see the pattern unfold. If it doesn't no rush. No need to be a hero.

At the time of publication, Action Alerts PLUS, which Cramer co-manages as a charitable trust, had no positions in the securities mentioned.

Editor's Note: This article was originally published at 7:20 a.m. EST on Real Money on March 25.

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