Buy on a pullback. Buy on weakness. Ideally, we would like to buy this stock lower.
I say it every day, I say it so much that it seems like a broken record, but the truth is that I say it because of days like today where events overwhelm you and you forget what you are supposed to do and your game plan can't survive even a minute of battle with the enemy, who may be the S&P futures and ETF sellers, or maybe short-sellers or maybe, and far more likely, your co-shareholders.
Today was just like that. I will give you the setup. At 2 a.m. ET, I get an alert from Unilever (UN) -- I like to take these instantly -- that looks like a bad miss, which it was. But I had gone to bed about two hours before so I slept in until 3:30 when I saw how Hong Kong had dropped because of some stern talk from a Chinese central banker about loan growth, something I didn't want to hear with the big Communist Party conference and 6.8% growth announced that was in line but not a barn burner.
Then I saw a story run soon after that about how SAP (SAP) disappointed, even though I couldn't for the life of me see what the disappointment was.
I did my 5 a.m. workout with CNBC's Worldwide exchange and I noticed that the ticker showed Apple (AAPL) down badly, more than a buck and three quarters, something that a bunch of my Twitter followers had flagged.
And then I remembered, 30th anniversary of the crash and the setup of worldwide turmoil, when we had just hit new highs in the Dow and S&P and Nasdaq, was way too potent and palpable, especially with the largest stock in the world down badly, for me to ignore that something big could be afoot.
That's when you have to be ready with the playbook. That's when you have to go over all your notes about what to buy and when and how if you get a pullback you need to pounce and not be so confused by the smoke of the battle that you panic like everyone else.
There are always different selloffs, no two are the same. There are also different stages in the cycle. We have a worldwide economic expansion, so you don't load up on recession-proof stocks, especially as their earnings profiles and charts -- as we know from "Off the Charts" Tuesday -- are breaking down. We also know these worldwide selloffs, though, produce a flight to quality, which means people sell stocks to buy Treasuries and a cursory look at 4:30 at the bonds told me that was certainly the case.
It's football season and I like to fancy myself as a quarterback in these situations where I do what's known as the checkdown: What are my first targets of opportunity, the ones that I have said specifically I want to buy into weakness?
Fortunately for me and for club members of Action Alerts PLUS, we rank our stocks each Friday, which is incredibly helpful on days like today. You will have stocks that on a pullback become Ones instead of Twos, my shorthand for from Hold to Buy. I know the fundamentals are strong but the price was reflective of too much enthusiasm.
Days like today crunch enthusiasm. What are my initial targets? I am looking for stocks that just gave us terrific information about how they are doing that are away from the European and Chinese blast zones! And yes, at least for today, not Apple because while I want people to own Apple, not trade it, I always like to give a couple of days berth after calls about suppliers being cut back and the analysts' reaction so I don't run into a buzz of a downgrade or two!
First, IBM (IBM) . We know from my interview with CFO Martin Schroeter last night that IBM could be at the beginning of a very large turn. I said that if this one pulls back, you have to recommend it. But that didn't happen. So that receiver was covered. Then second, Adobe (ADBE) came out last night and pre-announced a much better than expected quarter. If that stock wasn't up much, that would be a pound-the-table.
Nope, totally covered, up 14 in fact.
So next receiver? Drug stocks. Dollar's not going up. Some of these just reported. We said just last night that if Johnson & Johnson (JNJ) pulls back, it is a must buy.
Nope, no pullback. Don't sweat this. In a real bad selloff, some of these receivers would, indeed, be wide open. You have to keep checking down.
After I have sorted through the stocks that just reported, I have a fork in the road: Do you see any skill players to toss to with information that is out today, or recommendations being made today, or stocks of companies that reported amazing quarters a few days ago that are overlooked, or stocks that you wanted to get into ahead of the quarter -- a dicier proposition.
Suddenly we have receivers who are open, and unlike football, there are hundreds of receivers to check down. For example, doing any sort of clinical analysis of the worth of Allergan (AGN) , which has been an abomination, yields a stock that has shed 70 points already on the loss of one drug patent -- 10 times the sales of drug! -- and is beginning to be downgraded by a bunch of johnny-come-lately analysts and technicians. This is just where the CEO bought a ton of stock last time it was here, which coincidentally happened to be half the price Pfizer (PFE) was trying to buy the company for a couple of years ago.
Then next up, Abbott Labs (ABT) , which just reported a dynamite quarter yesterday, where analysts are falling all over each other to raise price targets, and it is down, it is down, hallelujah it is down.
Another mental note.
I know I like the airlines and I see United's (UAL) looking down badly. We catch a break: Phil LeBeau is interviewing the CEO, Oscar Munoz, and I get a queasy feeling that things are even worse than I thought, and a stock that is looking down three can't be bought. Good call, that would have been a pick-six of an interception.
But then I spot something else I like. All of FANG is going down in part because that's where the profits are and that means your fellow shareholders are bolting. However, we got a positive note today from a research firm that says the companies will have a strong quarter and I see from the headlines on CNBC that Alphabet (GOOGL) is putting a billion in a round for the private company, Lyft, the Uber competitor. Ah hah, another opportunity as Alphabet has Waymo, the self-driving system, and it can partner with Lyft to blow this out. (Apple, Allergan, Abbott Labs and Alphabet are part of TheStreet's Action Alerts PLUS portfolio.)
Another mental note.
Finally I see definitive battleground stock Lam Research (LRCX) at $195, the level it pretty much held yesterday after a great quarter but the traditional selloff. Martin Anstice, the fabulous CEO, tells a methodically positive story, and I have my last receiver I need to hit. No need to keep looking downfield if the market's coming back and the opportunity is gone.
Still, my battle plan -- now in my head, not like the old days -- worked and I was able to mentally sock in some terrific positions by hitting open receivers downfield for lots of first downs and maybe first-day positions.
There are only a few times this strategy didn't work, such as 30 years ago when you couldn't figure out where the prices were and, again, in the systemic-risk bad old days of the Great Recession where you had to be a seller, not a buyer, on any occasion, as those who follow me know I said, until the late Mark Haines told us that enough is enough and the selloff is over. Mark rarely made calls and when he did they were great ones and there were more open receivers available that day than any day in history.
My battle plan is pedestrian, doable and well within the ken of all who are reading and watching. The buy on a pullback is not a myth, it's just you need the guts to stick by your game plan and you will almost always do just fine, thank you.
Join Jim Cramer, CNBC's Jon Najarian and Other Experts Oct. 28 in New York
Jim Cramer will host CNBC's Jon Najarian, TD Ameritrade's JJ Kinahan, famed analytics expert Marc Chaikin and other market mavens on Oct. 28 in New York City to share successful strategies for active investors.
You can join them as they discuss how smart investors can make the most of options trading, futures contracts, fundamental and quantitative analysis and great ETFs to buy right now. Participants will also get a chance to meet Jim and other panelists and take photos.
When: Saturday, Oct. 28, 8 a.m.-3 p.m. ET
Where: The Harvard Club of New York, 35 W. 44th St., New York, N.Y.
Cost: $250 per person.
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