My Shorting Rules

Seeing as how Cramer is doing his anniversary show tonight and not making any major picks, I figure its a good time to list my general rules:

My general rules for shorting a Cramer pick are as follows. As I do more research these rules will most likely change, but here is what I have for now:

• Never short something Cramer says "could be the next Google", or "the Google of insert country here". These tend to run up big for a while. They also come down at some point, but not in the same way as normal picks.
• Never short a big well known company (at least not based on a Cramer pick). Lets say Cramer picks Apple one night and the stock goes up when he mentions it. Apple is a heavily traded stock normally, so a big increase is not abnormal and traders may let it run more. I like to short smaller companies he picks that not everyone knows about yet. I think people are more compelled to buy stocks that they think are the next hidden gem of a stock. This makes them bid up too much and make stocks ripe for a fall.
• Set your limits right away. Know which price you want to buy to cover at and set a stop loss in case it runs up. Even if a stock is dropping really fast and you think it will go lower than your preset profit price, stick to your original buy price. Be happy with your gain and move on to the next day.
• Take a look at INET Bookviewer INET is a routing service to the major US trading venues. This will tell you the current buy and sell orders for trades going through INET. This gives a pretty good idea of the supply and demand at any particular time, but not all trades go through INET so be careful. Level II quotes will also give this data for all trades, not just INET, but normally at a cost. I like to use this to set my buy to cover price. I look to see if and where there are a lot of buy orders at a certain price. I then tend to put my buy order 1 cent higher if it is near my desirable profit target.
• Only short Cramer's main picks. He normally has 2 or 3 major picks. Don't short his lightening round picks. These don't get the same pop in price as his main picks do.
• Don't short a Cramer pick when the stock in question is near a major event like earnings, or if news is expected to come out in the near future. Although this news could cause a sharp decline, there is a good chance it could cause a sharp increase. So the easy thing to do is stay away.
• New Rule Don't short a Cramer pick where the price after he mentions it doesn't go above the high for the day. It may also help to take a look at the recent price trend. In the case of ANGO, the stock had come down from near $30 to $22 in a few months. This stock just seemed to be looking for an excuse to run. The stock hit $24 during regular hours trading during the day Cramer mentioned it and fell to $21.95 by the 4:00pm close. Then after Cramer mentioned it, it only went to 23.25...... .75 cents lower then the high earlier in the day. So the stock was already trying to run up and Cramer's recommendation seemed to give it the big push it needed.