Charts suggest investors should bet on “workhorses” in the Dow Jones Industrial Average, says Jim Cramer

CNBC’s Jim Cramer on Friday asked investors to stay away from stocks in the Nasdaq Composite and instead bet on names listed in the Dow Jones Industrial Average.

“Although tech has started the new year strong and it was crazy good today, the charts, as interpreted by Larry Williams, say you have to be a little careful with the show horses on the Nasdaq and bet on the workhorses in the Dow,” he said.

Stocks rose on Friday to end a positive week for all three major indexes. The Nasdaq has climbed 11% this year, as investors have bet on less aggressive rate hikes by the Federal Reserve.

To explain Williams’ analysis, Cramer examined the daily chart of the Nasdaq-100 dating back to November 2021.

While some technicians believe it’s a bullish sign that the index has broken above its 200-day moving average over the past two days, Williams points out that the Nasdaq-100 has come back down after breaking the level earlier, according to Cramer.

He then reviewed the daily chart of the Dow going back to February 2022.

Unlike the Nasdaq-100, which Williams believes is a “show horse” index because of the amount of interest it receives, the Dow is more representative of Main Street, Cramer said.

He added that the blue-chip index broke out above its 200-day moving average back in November and has remained above it since.

“Williams finds this chart much more compelling,” he said.

For more analysis, see Cramer’s full explanation below.