Cloud computing and data storage companies have traded well as a group for more than a year now. Just look at the First Trust Cloud Computing ETF (SKYY), which is up more than 30% in the last 12 months. I’ve traded a few related companies in that time, and one I currently recommend is NetApp (NTAP).

Looking at the year-to-date chart (below), a few things jump out at me. The first is that the stock has been consolidating under $40 for much of the last two months. It broke that price and even $41 a few times, but pulled back each time. Most recently, it dipped briefly below $39, but that move came on below-average volume. In fact, it was the one of the lightest volume days in the last couple of weeks.

Trade of the Day: NetApp Inc. (NASDAQ:NTAP)

As you can also see, NTAP has bounced nicely since then and is right on the verge of reclaiming both the $40 price level as well as its 50-day moving average. And with the trading channel narrowing, I expect it to punch through the upper end of its channel and make new highs as it heads toward $45.

If the stock were to weaken, I would re-evaluate on a close under $39. That’s right around the May 24 low after earnings, and it could open up additional downside depending on the circumstances at the time.