As pointed out by Jim Cramer in one of his columns several weeks ago, cloud penetration is only about 10% right now across American business. Globally, the cloud is still insignificant. Chinese penetration is running in second place on this planet, and there, the number is only about 3%. Think Chinese business is still growing? Me too. Think American business is in a good spot? Me too. Think European, Japanese, and Korean businesses are going to have to find storage and software solutions going forward? See where I'm going? We're not going back to floppy disks, kids. I like pencil and paper myself, but I'm not going to invest in notebooks.

There are three kinds of services sold by the main players in the cloud space. There's Infrastructure as a service (IaaS), there's Platform as a Service (PaaS), and then there is Software as a Service (SaaS). The data can be broken down in several ways. Leaving out software, Amazon (AMZN) would appear to be the dominant player in the space, with a 51% share of the market.

However, including software services, it is Action Alerts PLUS charity portfolio holding Microsoft (MSFT) that comes out on top by a plurality, and with a higher growth rate than Amazon. Remember my December trading note. I let you know at that time that I was dissatisfied with my long position in Oracle (ORCL) , which had been my cloud play.

A six-month daily chart of Microsoft is telling. At least, I think so. Take a look at declining Relative Strength, a suddenly softer moving average convergence divergence (MACD), and the money flow heading toward the Mendoza line. Negative, right? Hold on, cowboy. I see something else.

Now, let's take a look at the Pitchfork. You can now see that the euphoric late October earnings pop was unsustainable. You can also easily see that the channel providing a range between the lower and central trend lines is very much intact. Not only that, but the lower trend line is supported by the 50-day simple moving average (SMA). Know what, gang? The algorithms and the simpletons who write them see this, too. I could be wrong. Maybe I'm the simpleton, but I bet we see support right there.

Microsoft

Target Price: $96

Aggressive Target: $102

Panic Point: $78

(This is an excerpt from Stephen "Sarge" Guilfoyle's Morning Recon, which now appears exclusively on Real Money, our premium site for active traders. Click here for a free 14-day trial and receive Morning Recon every day, along with exclusive columns from Jim Cramer, James "RevShark" DePorre, technical analyst Bruce Kamich and more.)

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At the time of publication, Stephen Guilfoyle was long AMZN, MSFT, BABA, ORCL, although positions may change at any time.

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