Cramer: Twitter flies higher for the long haul

Off the charts: Twitter's roller coaster ride
Off the charts: Twitter's roller coaster ride   

As Jim Cramer proclaimed on Monday, social media stocks are a hot commodity right now. Leading the way for this group on Tuesday was Twitter, when it soared 6 percent. But should investors be suspicious of this high-flying stock, or is the rally here to stay?

To find out, the "Mad Money" host went off the charts and spoke with Tim Collins, a technician and colleague of Cramer's at RealMoney.com.

"Believe me, it's an important question because Twitter's a crucial member of the leadership in one of the strongest groups in this volatile market," Cramer said.

Collins was not only able to answer the question, but he was even more excited about Twitter after Tuesday's move. He added that while he expects to see a brief pullback later in the week, he thinks the stock is headed higher, perhaps much higher than initially thought.





Looking at Twitter's daily chart in the past six months, Collins noted that the stock tends to move in a pattern. He saw multiple times that the stock traded up or down, and then consolidated and traded sideways for a while. Then the pattern repeated again.

Historically, the ceiling of resistance for the stock has been $50, and Collins said that when the stock breaks out above $50 that would signal that it's time to buy.

"Collins thinks the stock could be entering another phase where it rallies dramatically, like it did at the beginning of February," Cramer added.

What about the long-term view of Twitter?

The long run is what really got Collins foaming at the mouth for Twitter. Collins pointed out that since September; Twitter has been making an inverse head-and-shoulders pattern. That's when the chart looks like an upside-down person.

Silhouette of man against Twitter logo
Chris Ratcliffe | Bloomberg | Getty Images

This pattern is important as this formation is one of the most reliable bullish patterns that you can see. Additionally, Collins saw that this head and shoulders had a huge head.

Yes, that's right—a ridiculously big head.

And while the pattern might have a big head, he still thinks that this is a bullish signal for the stock. Collins thinks that as long as Twitter can break out from the right shoulder and close above $50 for the next two weeks, then investors could see it rally all the way up to $66.50 by the end of the year.

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Put all of these signals together, and Collins is seeing nothing but bullish days ahead for Twitter. He thinks it could even be the best stock to own for 2015.

"I think it's becoming a powerful advertising medium, so unlike Collins and other chartists, I'd like it even more on a pullback because the fundamentals of this hapless company are now on fire," Cramer added.

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