CNBC’s Jim Cramer on Tuesday revealed how he’s approaching the market, should stocks run into a volatile period in the near future.
Reacting to analysis from Carolyn Boroden, a technician who runs FibonacciQueen.com and contributes to RealMoney.com, Cramer offered a strategy to weather a sell-off in the current environment.
If the S&P 500 is due for a short-term downtrend, Cramer recommended that the average investor hold on and ride it out. As for those looking to trade out and back into their holdings, he broke down Boroden’s sell trigger.
“Watch the S&P … 5-day (blue line) exponential moving average and its 13-day, red line, exponential moving average,” Cramer said on “Mad Money.” “If the 5-day crosses below the 13, indicating that’s momentum turned against you, it’s also your cue to get out of Dodge.”
“Personally, I like to split the difference: sell part of your position, perhaps, but keep something on the table, and that’s what we’re doing with my charitable trust,” he added. “The trust’s selling some, but not all.”
While discussing chart insight and Fibonacci timing cycles from Boroden, Cramer considered that the market has climbed well past two price targets she set at 4,012 and 4,090. A temporary pullback in the S&P 500, which hasn’t traded under 4,100 in nearly three weeks, “wouldn’t surprise me one bit,” he said.
According to Boroden’s forecast, the broad index could swoop to the old ceiling of resistance at 4,012, or down 4% from Tuesday’s close, he added. The next floor of support is around 3,725, which would represent an 11% decline.
Last week the S&P 500 dipped 0.13%, snapping a winning streak that spanned four weeks.
