Some software stocks are worth buying on the pullback, according to Jim Cramer

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'Today the cloud stocks proved they can bounce, and after months of agony ... I think you can start gradually ... buying the highest quality names here,' the 'Mad Money' host says.

rose more than 1% on Thursday, though it's still down around 8% from its late July high.

"I think we've got a lot more reason to be constructive than we did a month ago. In mid-September, we conducted a damage assessment for you where I warned you that the cloud cohort had further to fall," Cramer said. At the time, Cramer advised viewers to sell most of their software stocks, many of which continued to struggle in the following weeks.

Before recommending whether to buy on the pullback, Cramer said he had to determine if it was caused by a general shift in sentiment or a shift in fundamentals for the sector."During last year's meltdown, the cloud software cohort fell 32% from peak to trough, over a period of 76 days," Cramer said. "Compare that to right now: This group was now down 33% as of yesterday, having been hit for 103 days.

But the other comparable decline for software stocks happened in early 2016, Cramer said. In that case, the broader sector was pushed down by severe shortfalls from Tableau Software, which was

 

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