Cramer talks about Disney’s career, and stock market pitfalls to avoid

CNBC’s Jim Cramer on Thursday shared common mistakes investors make during big market moves, especially during a rally.

On Thursday, the Dow Jones Industrial Average rose, closing more than 52 points higher. The index had sharply pared an earlier high of more than 450 points. Disney’s nearly 5% jump after earnings, combined with weaker-than-expected inflation numbers, helped lift the blue-chip 30 index.

Cramer advised investors not to make any major decisions based on a single data point, especially one that came close to estimates. If investors decide to buy, Kramer recommended making limit orders instead of market orders.

“Market orders put you at the mercy of an unforgiving market,” he said, noting that investors stick to specific orders to guard against radically overpaying for stocks.

Cramer also explained why he thought Disney was a “textbook winner” on Thursday. He said that stocks that are able to rise in the midst of a wave of selling are usually valuable. Cramer believes Disney was able to reverse the trend in part because of CEO Bob Iger’s confidence despite its mixed earnings report.

“When almost all the other stocks were falling off their highs, Disney stocks slowly, step by step, inch by inch, began to advance,” Cramer said. “When you see this kind of action, you know something special is going on, because this is a stock capable of defying the allure of the average after being cut in half over the past two years.”

Cramer ended up telling investors that market moves inspired by new data points can be fleeting and don’t always change the prevailing direction in the market. For Cramer, the current trend in the market is to sell shares of large-cap technology companies.

“But the bottom line? I can tell you that when you see the tech rally as part of a mass move like it did in the opening, it will result in a rout later in the day when the market changes direction,” he said. “Then you use this method to discover new batter winners.”

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Disclaimer Shares of Disney are held by the CNBC Investing Club Charitable Trust.