Jim Cramer: Cascading Cloud Kings Could Provide Big Opportunity

 | May 15, 2018 | 6:33 AM EDT
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I don't like it when no one knows what's causing certain stocks to go down. That's how I felt about the cascading stocks of the "cloud kings" Monday, including salesforce.com (CRM) , Adobe Systems (ADBE) , Splunk (SPLK) , Red Hat (RHT) and VMware (VMW) . I have developed enough sources at these companies to know that they fell because they were hitting 52-week highs and that they became intra-day sources of funds for lower-multiple semiconductor stocks.

If that's why they went down, of course, we should just sit there and scoop them up. A rotation out of one group of techs into another can often be fertile ground for the next round of buying. We've been trying to get into these stocks for ages for Action Alerts PLUS and this was the first breather they had.

The problem with that, though, is that there is no way the sellers would make it that easy. They either know something bigger -- something not yet known by the less clued in, including me -- or they have more to go because the stocks never really found any bottom yesterday.

No, now we have to wait for the downgrades, or the changes in business, or the contracts lost, or whatever are the real reasons that they went down to begin with. Without knowing about the downgrades or the shortfalls or the seachanges you are flying blind right into another round of selling.

Now I don't want to be too cynical about this, but it is relatively inconceivable that so many of the same kind of stocks would go down at the same time unless there was a downgrade lurking somewhere.

That said, I do believe that cloud onboarding and cloud management, the common thread of these stocks, remain as two of the most fabulous secular growth themes out there, the other being cybersecurity.

So, I say wait until mid-morning develops and if you are like me, look for a bottom and a reversal back up. That will be the all clear signal, the one I know I don't have right now. Whatever, today's the day that they would bottom if they were to bottom and the one that could be the tell is Red Hat because it was the most vicious of all the sells. Watch for a turn. However, if it opens up and then heads down, we're not done and you'd best to stay away from all of the cloud kings. The sellers are still lurking and they will make themselves right by the end of the day.

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