How Jim Cramer Knew to Sell Shopify Stock Before Its Recent Plunge

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Jim Cramer sold online-shopping giant Shopify (SHOP) - Get Report shortly before its recent big pullback because he was following Rule No. 3 of his "5 Rules for Today's Stock Market" -- "Bulls Make Money, Bears Make Money, but Hogs Get Slaughtered."

"Why did we sell it? What did we see? How did we know? Nothing -- absolutely nothing," Cramer said during his latest video-conference call with members of his Action Alerts PLUS club for investors. "But I said to myself: 'You know what, this stock has been parabolic ... and I don't trust parabolas. I don't like them. I have lost more money on stocks that went into parabola mode than I care to admit.'"

So, Cramer's charitable trust sold SHOP -- which it bought in May for $260 a share -- for about $388 on Aug. 23. That turned out to be a smart move, because the stock peaked at $409.61 intraday on Aug. 27 before starting what's now become about a 17% pullback. SHOP tumbled 5.1% on Friday alone to finish at $338.31.

Cramer said he didn't really see the pullback coming, but sold SHOP because his trust's position had risen by more than $100 a share in a matter of months.

"Sometimes your best moves are made simply because you say: 'I can't take it any more, this is too much.' I was being a pig," he said.

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Related Story: Jim Cramer: Buy Burlington Stores Stock When the U.S.-China Trade War Gets Ugly

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