Jim Cramer's 7 Deadly Sin: Sin No. 3 - Too Much Emphasis on Technical Signals

Action Alerts PLUS portfolio manager Jim Cramer sees a fundamental shift in investment cash flows happening as investors rotate toward stocks with lower price-to-earnings multiples and away from stocks with higher ones.

As Cramer always says, good stock picking is all about avoiding mistakes, and the mistakes investors tend to make can be boiled down into Jim Cramer's 7 Deadly Sins. The third of those sins is relying too much on technical analysis.

Relying too heavily on technical analysis can cause an investor to ignore a company's fundamentals.

Yes, a company's chart can tell you some things about a company's trajectory, Cramer says, but without fundamental analysis that information is not complete. 

"I like to spot good fundamentals while keeping an eye of the stock to pick when it breaks down," Cramer told listeners to his monthly Action Alerts PLUS call.

"Our portfolio is littered with such important choices, such as Home Depot (HD - Get Report) or Lam Research (LRCX - Get Report) , both bought at the height of technical breakdowns and commentary of scared analysts who don't want to be left holding the bag." 

Lam Research and Home Depot are key holdings in Jim Cramer's Action Alerts PLUS charitable trust

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