In the early 2000s "software as a service" companies such as Salesforce.com Inc. pioneered the model of renting niche applications to customers by the month. Hosting companies also offered to run companies' software in their far-off computing centers for monthly and yearly fees.

It was the Web companies, led by Amazon, that went a step further and sold these types of services on a utility basis. A company could fire up hundreds or thousands of computers on the fly and turn them off when the work was done. Instead of monthly or yearly contracts, customers pay only for what they use in computing cycles, bandwidth, and storage.

"Pay-by-the-drink pricing seemed natural to us," Jassy says. The most obvious appeal of such cloud services, of course, is the potential to save money. Business buyers have gone through decades of technology transitions, tacking new hardware and software onto the old.

The average corporate IT department has to deal with the dreaded 70/30 rule where they spend about 70 percent of their technology budgets just trying to keep this jumble of products running, leaving only 30 percent to chase new ideas.

Chief information officers have to buy equipment by the ton to meet spikes in computing demand or prepare for disasters, and then watch as that gear sits idle most of the time. While companies struggle to deal with this mess, they've become overwhelmed by the influx of data in the Internet Age.

The promise of the cloud is shoving the costs of dealing with all that off the bottom line. The cloudpeople suggest a daring complement to the cost-cutting: Adopt the rapid- prototyping, beta-testing lifestyle of the new era. Relinquish control of your technology infrastructure -- you don't need it anymore. Let employees toss out new services and see what sticks. Innovate with impunity.

Eoin Treacy's view I first wrote about cloud computing shares a year ago. Here is a link to Comment of the Day on March 5th 2010, when a number of the relevant shares were breaking out of decade long bases. A search using "cloud computing" as the keyword will produce 7 results, most of which incorporate chart reviews. Most have since been released into the public archive following the mandatory four-month lockup.

The Nasdaq has been among the better performing indices globally over the last two years and is one of handful that has moved above its 2007 peak. Cloud computing and healthcare stocks have been among the leaders. Also see Comment of the Day on January 26th for a review of some of the relevant healthcare shares.

Technology is an exciting area, full of optimism and dreams of an innovative future. It is easy to allow one's imagination to take over from due diligence but cloud computing is important in one vital respect; it helps to create previously inaccessible efficiencies. Many people are familiar with walking into IT departments littered with old or redundant machines, or battling with computer systems that don't know how to talk to one another. Cloud computing removes the need to house data on site. Obviously there are security concerns about such activity but this does not preclude corporations from migrating non-critical operations onto a cloud system. This is a growth industry which is only beginning to gain widespread acceptance. It will be a battle royal for dominance in the data markets but there are some clear upside leaders.

Amazon remains in an impressively consistent medium-term uptrend. It continues to consolidative above $160 in a steady mean reversion and a sustained move below that level would be required to begin to question medium-term upside potential.

IBM broke above its 1999 peak in October, consolidated briefly above $140 and remains in a consistent medium-term uptrend. While somewhat overextended in the short-term the $140 area can reasonably be expected to offer a floor on any reversion towards the mean.

Google rallied back to test the January 2010 peak above $600 and has been ranging in that area since October. A close above that level would reconfirm a return to medium-term demand dominance.

BMC Software completed a lengthy first step above its base in September and continues to post a series of small consolidations one above another. While somewhat overextended relative to the 200-day MA, a sustained move below $47 would be required to indicate a swifter reversion towards the mean is underway.

Citrix Systems has paused mostly above $60 since October and is now testing the upper side of the six-month range. A sustained move below the 200-day MA, currently near $60, would be required to question potential for a successful reassertion of the medium-term uptrend.

Check Point Software completed a first step above its almost decade long base in September and remains in a consistent medium-term uptrend. A sustained move below $45 would be required to question the consistency of the advance.

Cognizant Technology Solutions remains in a steep, stunningly consistent medium-term uptrend, with a series of $8 consolidations one above another. A congestion area of greater than $10 and or a sustained move below the 200-day would be required to question uptrend consistency.

Oracle has had a less consistent advance but hit a new recovery high in September and has held a progression of higher reaction lows since. A sustained move below $28 would challenge the medium-term uptrend.

Juniper Networks bottomed in 2002 and only completed its base a month ago. A sustained move back below $35 would be required to check recovery potential.

EMC Corp also bottomed in 2002 and ranged mostly below $20 until October 2010. It broke above the 2007 peak last month and while somewhat overextended relative to the 200-day MA, a sustained move below $20 would be required to question recovery potential.

Altera Corp completed its base in September and has exploded higher. A break of the progression of rising reaction lows, currently at $39 would be needed to suggest a mean reversion is underway.

The majority of technology funds have an overweight position in Apple which by all accounts is developing its own cloud offering. The share remains in a consistent medium-term uptrend, defined by its progression of higher reaction lows and a sustained below €300 would be required to question medium-term upside potential.

Citrix Systems and Amazon have both almost completed reversions towards their respective means. There are a number of the above shares that have become overextended relative to their 200-day MAs and are at risk of a reversion. This would create buying opportunities for the longer-term in this exciting and promising sector.

More than a decade ago, the number of technology analysts far outweighed those covering just about every other sector. That is no longer the case. The lengthy base formations experienced by many technology shares means that the number of funds offering exposure to individual segments of the technology sector is relatively small. I could not find a fund that offers specific leverage to the cloud computing sector. If subscribers know of any that are overweight in the above companies I would be happy to add it to the Chart Library.

The US listed Fidelity Select Technology Fund's has a 0.3% management fee and 0.75% redemption fee. Its largest positions are in Apple and Google. It also holds relatively small positions in Oracle, EMC Corp, BMC Software and Cognizant Technology Solutions. The fund has performed in line with the Nasdaq-100 and is equally overextended relative to the 200-day MA. While still in a relatively consistent medium-term uptrend, the risk of a reversion towards the mean is rising.

The Polar Capital Technology Trust is listed in the UK and trades at a 3.6% discount to NAV. It holds Apple, Google, Microsoft, Oracle and IBM in its top-10 holdings. The trust remains in a consistent medium-term uptrend but is currently pulling back towards the 200-day MA. A sustained move below 325p would be required to question the consistency of the 2-year advance.

The RCM Technology Trust is also listed in the UK and trades at a discount to NAV of 7.05%. Apple and Amazon are its two largest holdings and it also has a number of Chinese technology companies. The trust found support at the upper side of its base in June last year and hit a new recovery high in September. A sustained move back below 300p would be required to question medium-term upside potential.

Hercules Technology Growth Capital is also worthy of mention. It provides venture capital to small technology and life science companies. It is listed in the USA and yields over 7%. The share has been ranging mostly below $11.25 since late 2009 and is currently retesting that level. A clear downward dynamic would now be required to check potential for a successful upward break.