Cramer: Sacrifice the Chasers so Apple Can Rise

We all saw it, the hideous horrible reversal in Apple(AAPL) yesterday and the plummet into the close. It transfixed us. Reversed hard. An intraday reversal. The kind of reversal that any rookie chartist would tell you is the beginning of a rollover. The kind of reversal that, immediately, signaled to everyone I know that the run in Apple, and the stock market for that matter, is over. No questions asked. Done. Finished.

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Now because of that rollover there are people, for the first time in nine days, who come in and are down on the stock. They have losses. They chased. They top-ticked for the moment and now they are furious and they are scared and they are looking over their shoulders, and of course, they are blaming me. These people are horrible shareholders. They are total momentum hounds. They don't realize that the stock can go to, say $475 and maybe lower, before it goes to $550, which is where I think it is headed because after last quarter it could earn as much as $55 a share for fiscal year 2012 and I think Apple deserves a ten multiple.Here's the issue. There are more people who bought it lately because of momentum than because of earnings. You know that. That's what the reversal meant.Now you have to wait until all of these latecomers leave because they, themselves, are the source of their own misery.So, you have these two nonfundamental forces, the people who short island reversals, which is what Apple had, and the people who topticked Apple and now blame people like me because I have a $550 target.Both groups have to be appeased and then, ultimately, fooled.I will tell you what I feel badly about. We need to be more cautious until the big shakeout in names like Amazon(AMZN) and Google(GOOG), which I have been saying for days now belong lower. I invest in earnings, not island reversals and not momentum. Unless Apple's iPad is pulled from China off of a patent dispute -- and I did write here and say on "Mad Money" that Chinese execution is the dominant risk -- then I think it can make $55 and deserves to sell at a ten multiple.

But the people who got in Wednesday? I bet many don't understand what an earnings estimate means and most have no idea what a price-to-earnings multiple is.

These people have to be sacrificed on the altar of the island reversal before the stock can rally again. So, if you ask me when it is done going down and ready to go up my answer is: AAPL bottoms when these weak hands surrender and not a moment before then. You cannot be more exact because you are simply gauging pain tolerance and technician stubbornness and both forces do not lend themselves to objective, forceful analysis.

Action Alerts PLUS, which Cramer co-manages as a charitable trust, is long AAPL.

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