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The Dow Jones industrial average moved from around 10,700 on Friday, September 23, to 11,355 intraday on September 27, representing a 5.6% increase in 3 trading sessions. The Dow eventually closed at 11,190, up 1.33% on the day. Market pundits rationalize that the market is rising on hopes of a resolution in Greece and the eurozone.

Pinning on “hope” alone is an insufficient strategy for protecting capital. What is certain is the growing volatility of the markets, which began in August. Tradable via the iPath S&P 500 VIX Short-Term Fund (NYSEARCA:VXX), the index fund is now at prices not seen since October 2010.

How does Jim Cramer handle investing in companies in this environment? Cramer has 1 buy, 3 sells, and 2 "watch list" stocks. He says to buy Aruba Networks (NASDAQ:ARUN); sell Bank of America (NYSE:BAC), Citigroup (NYSE:C), and Goldman Sachs (NYSE:GS); and to watch Universal Display (NASDAQ:PANL) and Paychex Inc. (NASDAQ:PAYX).

Sell Financial Companies

1. Citigroup

Three stocks Cramer says to sell are in the financial sector. Citigroup was last trading at $26.99 on a day where the intraday high was $28.32. Cramer recommended that if there are two days of strength, investors should sell.

Citigroup, as discussed previously, does not meet the criteria that suggest the shares would hold up if the eurozone fails to stabilize. Cramer goes further by suggesting that all financials be sold, but that recommendation is too broad. There are still good banks to buy; Wells Fargo (NYSE:WFC) is one that comes to mind.

2. Goldman Sachs

Cramer is bearish on financials, and this includes Goldman Sachs. Goldman Sachs closed at $99.55.

Sure, Goldman may “rule the world,” but if the company were healthy, it would not be rumored to be cutting jobs. Goldman closed recently at $99.81 and has a P/E of 9.76. After rallying between July 2010 and January 2011, shares peaked at $175 on January 14 and established an unbroken downtrend since.

3. Bank of America

Cramer said that Bank of America was “not done going down, because the financials are in bear market mode.”

Bank of America lacks a growing competitive advantage, stable to growing sales, a healthy balance sheet (due to Countrywide Financial), or strong leadership and management. Bank of America trades well below book value, but Countrywide is still a big question mark. Its liabilities are not fully understood by anyone. Shares will therefore trade based on speculation and market gyrations.

Stocks Jim Cramer mentioned to watch:

4. Paychex Inc.

Cramer posted on Twitter “We have $PAYX to go over that quarter. just announced....”

Its CEO told Cramer that “This is the sixth consecutive quarter in a row that we’ve seen checks per client increase.”

Paychex reported an earnings per share profit of 41 cents a share ($148.9M), up from $0.36 a year earlier. The company beat expectations of $0.38. The company offers clues on the health of the job market. The company should not be considered a buy, given the weak consumer confidence and weak job market, the conditions of which have worsened since August.

5. Universal Display Corporation

PANL reached Cramer’s lightning round recently. Since it is not a company he is familiar with, Cramer said he will address it in a future broadcast.

Universal Display was considered as a buy on August 29 at a price of $51.22, moving to $58.36 on September 19. Shares are already up from $22.80, a price reached on August 8. Since then, the OLED maker reached a lighting deal with Panasonic, igniting a higher share price. Investors interested in exposure to lighting might also consider Cree Inc. (NASDAQ:CREE). Cree trades at a P/E of 21.90, and recently made an acquisition to gain exposure in the consumer lighting market.

6. Aruba Networks

During his lightning round, Cramer said he was bullish on Aruba Networks (ARUN). The company is in the video conference business.

After failing to hold $30, shares traded around the $20 zone since August. Shares were hit partly because of the weakening outlook for a sector dominated by Cisco Systems (NASDAQ:CSCO). Although there are bullish calls for this company, there are more compelling niche plays for investors. Riverbed Systems (NASDAQ:RVBD) is a company to watch. It sports a high P/E as compared to Aruba, but at lower prices it offers a long-term risk-reward profile.

Source: 6 Jim Cramer Stocks To Buy, Sell, And Watch