Markets

Cramer's Investing Club: Take the Other Side of the Trade During Times of Turmoil

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(This article was sent first to members of the CNBC Investing Club with Jim Cramer. To get the real-time updates in your inbox, subscribe here.)

Stocks strongly rebounded Tuesday and ended a three-day omicron-driven slide as the potential of U.S. lockdowns diminished, gains from the great corporate earnings from Micron (MU) (a supplier of the basic building blocks in semiconductor technologies) and Nike (NKE) spread to other stocks in their sectors, and the market entered a seasonally strong period.

Big market turnarounds like what happened today are why we constantly preach the importance of staying the course. When the market has that "sell everything" mentality, you may want to panic but you absolutely cannot because panicking is not a strategy. Instead, try taking the other side of the trade during times of turmoil.

That's what we do. We dip into our cash position (because we have been keeping cash in preparation for a market-wide sale) and opportunistically look for things to buy. Our favorite situation is when the stocks on our shopping list fall because people are trying to get out of everything. 

Take for example some of our buys since last week. Did Boeing (BA) deserve to see nearly all its gains from China's 737 MAX airworthiness directive wash away? Or why do people keep selling Chevron (CVX) and its big dividend despite its ability to generate billions in excess cash flow at even lower oil prices?

Scaling into positions

Not all our buys will work out as planned. We are far from perfect. But we are long-term investors, not traders, and we nearly always add to our positions using the concept of scale, meaning we buy and then wait for a lower level before adding to the same stock again. Scales and levels help during volatile times like these.

As we head into the evening, we are not even going to begin to try to predict what the market may do tomorrow because that is a sucker's game. But one thing we can say for certain is that if the market gets hit tomorrow, or a few days from now, like it did Monday or countless times in recent weeks, our opportunistic approach of looking for stocks to buy will be the same. 

The CNBC Investing Club is now the official home to my Charitable Trust. It's the place where you can see every move we make for the portfolio and get my market insight before anyone else. The Charitable Trust and my writings are no longer affiliated with Action Alerts Plus in any way.

 As a subscriber to the CNBC Investing Club with Jim Cramer, you will receive a trade alert before Jim makes a trade. Jim waits 45 minutes after sending a trade alert before buying or selling a stock in his charitable trust's portfolio. If Jim has talked about a stock on CNBC TV, he waits 72 hours after issuing the trade alert before executing the trade. See here for the investing disclaimer.

 (Jim Cramer's Charitable Trust is long BA, CVX.)

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