The Rules of the E-Game

Cramer provides eight simple strategies for Net-stock trading.
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Investing carries with it certain rules, rules meant to help us spot undervaluation and avoid overvaluation. Trading carries with it certain patterns, patterns meant to produce winning trades and back on losing trades.

If traders see a head-and-shoulders pattern developing, they would instinctively shy away from the long side. If they see a big saucer bottom on good volume, they would be drawn to buying stock.

I know, I know, where is he going with this soporific rap? Well, what if e-trading has its own set of patterns, patterns that always produce a winner? Wouldn't we be silly to avoid these patterns or not learn from them?

I have spent months trying to understand the rhythm of the Net stocks and how they trade, and I've come up with what I think is a theory about how they work. It seems almost too intuitive, but that's not surprising considering this tape. Here are the patterns of e-trading as I see them.

One, if a company uses ".com" in a press release and you can buy 1,000 shares faster than anybody else, you stand to make a couple of thousand dollars.

Two, if a company uses ".com" in a press release having never used that phrase before and you can buy 1,000 shares faster than anybody else, you stand to make about $5,000.

Three, if a company mentions a high growth rate for its Web site in a press release and you can buy 1,000 shares faster than anybody else, you can make six or seven times your money by noon.

Four, if a company issues a press release and in it are the words "joint venture" and any mention of

America Online

(AOL)

,

Yahoo!

(YHOO)

or

Amazon

(AMZN) - Get Report

, and you can buy 1,000 shares faster than anybody else, you can make $10,000. If a company issues a release and in it are the words "joint venture" and mention of

Excite

(XCIT)

,

Infoseek

(SEEK)

or

Lycos

(LCOS)

, and you can buy 1,000 shares faster than anybody else, you can make about $4,000.

Five, if a company gets mentioned on day one by

Joe Kernen

as appearing on

Squawk Box

the following morning, and you can buy 1,000 shares faster than anybody else -- and hold it overnight -- you can make $15,000 by the end of the interview on day two. (Avoid Cramer as a co-host.)

Six, if a .com company issues a press release announcing it is going to be on

CNBC

and you can buy 1,000 shares faster than anybody else, you can make $5,000.

Seven, if a non-.com company announces in a press release that it is teaming up with a .com company and you can buy 1,000 shares of the non-.com company faster than anybody else, you will make about a half-point. If you can buy 1,000 shares of the .com company faster than anybody else, you will make about three points.

Eight, if a .com company issues a positive press release but you cannot get there fast enough, you can take 1,000 shares of Amazon,

eBay

(EBAY) - Get Report

or

uBid

(UBID)

, if the former is a commerce site, and still make four or five points. If the former is pseudo-portal site or an adjunct to a legitimate portal site and you take 1,000 shares of AOL, Yahoo, Lycos, Excite or Infoseek, you will make $3,000.

There you have it. Eight simple rules that work. And as long as they continue to work, you are going to have the lunacy you see every day in this market continue. At least you know the rules now, so gentlemen, start your cable modems.

James J. Cramer is manager of a hedge fund and co-chairman of TheStreet.com. At the time of publication, his fund was long Yahoo, Amazon, America Online and Lycos, though positions may change at any time. Under no circumstances does the information in this column represent a recommendation to buy or sell stocks. Cramer's writings provide insights into the dynamics of money management and are not a solicitation for transactions. While he cannot provide investment advice or recommendations, he invites you to comment on his column by sending a letter to TheStreet.com at letters@thestreet.com.