Twitter's Charts Show Followers Leaving Its Stock

There are people who watch Twitter and people who watch Twitter (TWTR) - Get Report . I happen to do both.

With TWTR trading sharply lower Wednesday, a visit with the charts seems to be in order.

In this daily chart of TWTR, above, we can see how prices made a low in February and a retest of that low in May. Prices crept higher in June and July -- until this morning. Prices are still above the rising, 50-day simple moving average line, but that line may get tested if the weakness is not quickly reversed. Prices stopped short of the declining, 200-day moving average line.

The On-Balance-Volume (OBV) line showed some improvement from early June, signalling that buyers of TWTR had become more aggressive. The 12-day momentum study was on a different page, and diverged bearishly from the higher price highs in June and July with only the same highs.

In this weekly chart of TWTR, above, we get a longer-term view of the stock's performance. Prices rallied to the underside of the declining, 40-week moving average line. The OBV line on a weekly timeframe is much more encouraging, with three months of gains. The trend-following Moving Average Convergence Divergence (MACD) oscillator is rising, but is still below the zero line.

TWTR made a gap to the downside back in late April (visible on the daily chart above) and it managed to make a recovery. Longer-term investors may have patience as an investment hypothesis plays out, but that is not my personal style.

The big chart risk with TWTR, in my opinion, is that $14 support area. It could hold again and re-base further, or it might break with prices falling still further. If you own TWTR and still have a profit, I would protect it. If you own TWTR and are under water, I would probably take the loss -- unless you are from Omaha. If TWTR manages to stage a reversal you can always rebuy it.

Twitter is a holding in Jim Cramer'sAction Alerts PLUS Charitable Trust Portfolio. Want to be alerted before Cramer buys or sells TWTR? Learn more now.

Editor's Note: This article was originally published at 10:01 a.m. EDT on Real Money on July 26.