Jim Cramer's Mad Money, 2/22/08: Rally Round the Cash

Includes: DIA, QQQ, SPY
by: Miriam Metzinger

Stocks discussed in the in-depth session of Jim Cramer’s Mad Money TV program, Friday February 22. Click on a stock ticker for more analysis:

Rally Round the Cash

Cramer devoted Friday’s program to discussing the importance of rallies and how to play them. Cash is an important ingredient of every portfolio (which should have a minimum of 5% and ideally, 10% cash). Rallies are good opportunity to cash in by selling some big winners, especially those which have made dangerously dramatic moves up. Not selling when presenting with such an opportunity is “reckless…that is asking for a trainwreck.”

"A rally is your best opportunity to protect yourself from the downside,” Cramer said. “You'll get the most mileage out of preparing for the worst days on the best days." Other ways to use rallies are to sell risky momentum stocks and to trim oversized positions to create a more balanced, diversified portfolio. A rally can also indicate which stocks are losers, and when a rally fails to bring up a stock in a winning sector, it is “a sign that something is very, very wrong,“ said Cramer. It is "usually a macro problem. Bottom line, sell your big winners, your momentum names and your losers."

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