Revisiting the Cramer Crackle
On January 25th I wrote a blog entry called “2006’s Biggest Cramer Crackle!” I was referring to Rediff.com (REDF). It jumped up 29% in price on the next opening day. I was actually assuming that the thing would settle back down. Glad I didn’t predict that it would because it actually is UP 60.2% FROM THAT OPENING PRICE. The other stock mentioned that day Danone (DA) is also up 6.8% from its next day’s opening price.
There were other large Cramer Crackle stocks since January 25th:
Sirenza Microdevice (SMDI) Cramer Crackle: 20.4%
Omnova Solutions (OMN) Cramer Crackle: 33%
NMT Medical (NMTI) Cramer Crackle: 21.6%
Acadia Pharmaceutical (ACAD) Cramer Crackle: 26%
Pan American Silver (PAAS) Cramer Crackle: 6.2%
Bookham Inc (BKHM) Cramer Crackle: 22%
LifeCell Corporation (LIFC) Cramer Crackle: 11.6%
Hexcell Corporation (HXL) Cramer Crackle: 10.1%
Jim Cramer talked about this effect on his Real Money radio show on Monday 6 February. He said that you should never pay more than 25 cents than the previous closing price.
That’s pretty good advice for the following stocks that FELL after their Cramer Crackle prices:
(as of closing Wednesday 8 Feb)
Omnova: -11.9%
Pan American Silver: -5%
Bookham: -11.7%
LifeCell: -6.3%
Hexcel: -4.3%
See! You don’t always want to buy them the next morning.
Here’s some winners (Percentages post-Cramer Crackle as of 8 Feb):
Sirenza: 3.9%
NMT Medical: 2.0%
Acadia: 6.1%
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Tell me about the “Cramer Crackle!” I’ve been in mutual funds for 20 years, but accidentally caught Cramer’s radio broadcast about 2 weeks ago, and caught the “market fever.” I opened a brokerage account and bought one of his recommended stocks that very day. The next day, I decided to buy a handful more. Well, about half those stocks have gone down from that price I paid.
It took very little mental effort to realize exactly what was happening…all the novices like myself were running to purchase his stocks, running up the price, and after the initial fever, the prices went back to their “real” value. I’ve figured out very quickly to wait a day or two after Cramer recommends something on air to purchase.
Another lesson learned, don’t forget to factor in the price of commissions when buying/selling.