Cramer's 'Mad Money' Recap: Staying Cautious for Coming Week's Earnings

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Cramer said Dynavax shows the downside of speculating in biotech and he got this one wrong. Since the FDA did not reject Dynavax's drug, Cramer said he wouldn't be a seller down here, as the company has plenty of cash to survive and lots of promising prospects.

No Huddle Offense

In his "No Huddle Offense" segment, Cramer educated investors on what the term "oversold" really means. Using Apple (AAPL) , a stock which he owns for his charitable trust, Action Alerts PLUS, as his example, Cramer explained why the stock fell sharply to just $504 a share, only to snap back sharply to $529 a share later in the day.

Cramer said often times large sellers of a stock will simply overwhelm the buyers, as they have been in Apple. As the sell orders from big shareholders start to flow, others investors will follow suit and short the stock, betting that the flow will continue to be negative.

Eventually the big guys run out of stock to sell, forcing the shorts to buy back their shorts, sending shares higher. That, said Cramer, is how a stock can fall to $504 only to recover over $25 as the shorts decide the big boys are done with their selling.

Cramer said that Apple remains insanely cheap and despite all the worries, not a single analyst has dared to downgrade the stock.

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-- Written by Scott Rutt in Washington, D.C.

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