Cramer's Mailbag: Trading Is Fundamental

Base decisions to buy or sell on your fundamental reason for the trade, says Cramer.
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Editor's note: Jim Cramer answers questions below.

At what point do you give up on a stock you've been buying as it's fallen down in price? I know that you say no one has ever made a dime by panicking. -- Geri H.

Jim Cramer

: It doesn't matter to me where a stock's been but rather where it's going. Whether I'm up 10% on a position or down 10%, I'm only going to make the decision to buy or sell when some part of my fundamental reason for the trade has materially changed.

Can you explain why you said the high short interest in Biosite (BSTE) could be a bullish sign? -- Eddie W.

Jim Cramer

: First of all, this is a contrarian call. As of the latest monthly data, some 4 million shares of the diagnostic kit maker were being sold short by traders betting that the stock would move lower. This is equal to 25% of the company -- any number above 10% is quite large -- and 15 days of average trading volume.

My homework tells me that Biosite's fundamentals are stronger than the current stock price allows and that the shares are not too expensive at 20 times expected full-year earnings. With that in mind, I believe these short-sellers will ultimately have to buy Biosite to reverse their trades, especially if good news hits. This rush to buy the stock could send Biosite up toward $60.

Jim Cramer is a director and co-founder of TheStreet.com. He contributes daily market commentary for TheStreet.com's sites and serves as an adviser to the company's CEO. Outside contributing columnists for TheStreet.com and RealMoney.com, including Cramer, may, from time to time, write about stocks in which they have a position. In such cases, appropriate disclosure is made. To see his personal portfolio and find out what trades Cramer will make before he makes them, sign up for

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