"There is a Castle on a Cloud... I like to go there in my sleep. Aren't any floors for me to sweeeep... there in my Castle on a Cloud."
-The SKYY Cloud Index is up nearly 150% from the 2016 low.
-The Cloud Computing sub-sector is super hot.
-Another ETF, CLOU just launched.
-Many of the charts we track are due for consolidation.
For most of the last two years or more Cloud Computing companies have experienced blue skies filled with big fluffy white clouds. Our barometer is warning of a change in pressure and the darkening grey on the horizon could spell trouble as we enter thunderstorm season. It could get bad, we might need Gary England!
There are a number of big Tech companies that "play" in the Cloud Computing space, the First Trust ISE Cloud Computing Index (SKYY) provides a nice clean chart and includes about 30 names and while it, like most Tech ETFs, has a healthy dose of the same standard Mega-Caps that make up almost every tech ETF at ~35% it is less dominated by them than many others. In fact the "AAG" of the "FAANG" do not even make the top 10 holdings (as of 4/30)).
The term "Cloud Computing" is almost a loaded term like "Retail" covering a vast spectrum from anything using a larger number of servers, to companies more singularly focused on IT or HR, to various hosting companies. And while it seems to be a crowded trade and some of those big guys are aggressively trying to gobble up the competition, there is risk of a lot of shakeup and volatility to come.
The sub-waves and Fibonacci extensions work very well in SKYY for 5 waves up completing off the early 2016 low. The wave iii inside 3 was very extended pushing the 3 up to a 261.8% extension, but the 5th off the December low is looking very near complete with its own compliment of subwaves and at a nicely proportionate ratio to wave 1 (123.6%).
Now I am going to let Garrett tell you about a few specific names (but certainly not all) that mirror this completing 5up pattern very nicely.
Back in August on Workday (WDAY) we were looking for a fade back to the 120 region for support as a fourth, we got that into November setting up this nice run higher. Now it is into the next Fibonacci resistance region the 161.8%-176.4% for the Intermediate wave (3) and due for a larger degree fade as (4) back the the same previous support region or a bit higher, around 132 is ideal.
Shopify (SHOP) is completing a nice impulsive pattern off the 2016 low. It is currently acting like a blow-off top for the 5th of a (5)th just passing the 200% Fibonacci extension, but with a proportionate move to the wave (1) and a complete compliment of subwaves inside the (5). Initial targeted support for a fade would be the Dec/Jan lows.
Coupa Softeware (COUP) has a very similar impulse but started in early 2017 rather than 2016. The (3) there hit the 200% so the (5) now is trying to stretch to the 261.8% Fib. There is a nice triangle as the Minor degree 4 sub-wave inside (5), and Elliott Wave Theory says that a triangle appears in the wave position prior to the FINAL move at that degree. This makes the region from here to 110 a high probability target for a top to form with initial support looking for a fade back toward the 50s.
Paycom Software (PAYC) is not as new of a stock, it has a more established impulsive count off the 2014 low. 2016 counts best here as the low for a Primary degree wave 2, and this is nearing the end of the Intermediate sub-wave (5) inside that Primary 3. It is following "Fibonacci PinBall" very well and more so than some of the others has clear room for more of a Minor degree 4-5 of (5) toward 220+ provided the 4 can hold support in the 155 region. Failure to hold there or after the likely 5th to 220 support for the larger Primary 4 will be back toward the 100 region.
Twilio (TWLO) another clear impulse with 5up completing off the 2017 low. No evidence that a top is forming yet, but the (5)th counts best as an Ending Diagonal off the December low, and Elliott Wave teaches us two things about the end of an "ED", 1) the breakdown can be harsh and swift & 2) the initial support is often the same region where the Diagonal began. That puts initial support here also targeting back to the same region as the December lows.