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Cramer: Three Ways to Find the Winners When the Market Dips

Jim Cramer outlines how a downturn holds some buying opportunities. Here's what to look for.

To keep from being devoured when the bears emerge on Wall Street like they did at the start of this week, try this three-part strategy from TheStreet’s Jim Cramer. He shared it during a recent Mad Money TV show.

Stocks fell Thursday and Treasury bond yields tumbled to five-month lows as investors feared the the spread of new coronavirus infections could stall global growth. But, Cramer says, market declines always offer buying opportunities for investors who do their homework.

Find the Bulls

The first thing Cramer recommends is to find the bulls running among the bears as a buying opportunity. On Tuesday, “that was Amazon  (AMZN) - Get Amazon.com, Inc. Report, which received good news when the Pentagon canceled a big contract with Microsoft  (MSFT) - Get Microsoft Corporation (MSFT) Report," Cramer said. Shares of Amazon are up about 14% over just the past month and Cramer said the momentum remains strong. Investors can also consider names like Apple  (AAPL) - Get Apple Inc. (AAPL) Report, another Action Alerts PLUS holding.

Find out which stocks are ripe buying opportunities when the broader market dips in Cramer's investing ideas and trading strategies on Real Money.

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Find the Sales

Part two of Cramer’s strategy is to pull out one’s personal shopping list and consider stocks now “on sale.” 

“Stocks like Devon Energy  (DVN) - Get Devon Energy Corporation Report rarely see down days when oil demand is strong," making recent dips a gift, Cramer said.

Look for Stocks Swept Up in the Downturn

The final class of stock that Cramer would buy is great companies that are only declining because the broader markets are. Stocks like American Express  (AXP) - Get American Express Company Report fit this bill, as the company is doing great and was only pulled lower because it's a part of so many exchange traded funds.

Cramer says to approach buying in a mixed market with extra caution.

“When buying stocks on down days, don't be arrogant. You'll never know exactly how far shares will fall. That means being patient and buying in stages as the markets tumble lower,” Cramer said.