DRAM: Here’s why this Micron, SanDisk, Western Digital ETF is soaring

The Roundhill Memory ETF (DRAM) continued its strong uptrend today, August 17, helped by the ongoing rebound of top companies in the industry. DRAM jumped to $60, its highest level since July 15 this year. 

Top memory stocks are rebounding

The DRAM ETF has become the most successful ETF launches this year. Launched in April, it has accumulated over $24 billion in assets, with its daily trading volume being in a strong uptrend.

DRAM has rebounded in the past few days, helped by the ongoing surge of its key constituent companies. Samsung Electronics, the biggest constituent, jumped to 274,500 won on Monday, its highest level since July 22nd. It has jumped by 45% from its lowest point this year.

SK Hynix stock has jumped to over 1.645 million won, up substantially from the YTD low of 1.24 million. 

In Japan, Kioxia Holdings jumped to 61,840 yen, its highest level since July 23rd. Other US memory companies like Micron, SanDisk, and Western Digital have also soared.

The ongoing rebound has coincided with the recent rescue of Situational Awareness, a top hedge fund that lost billions of dollars. Traders have bought this dip since one of the biggest sellers has been removed from the market.

Most importantly, these companies and their customers released strong financial results, demonstrating that demand is rising. For example, Micron’s third-quarter revenue jumped to $40 billion, with the company expecting it to jump to $50 billion in Q4. 

SanDisk’s revenue jumped by 51% QoQ to $8.9 billion, with its annual figure soaring by 175% to $20.2 billion. Western Digital’s revenue soared by over 43% YoY to $3.75 billion. 

In addition to this, these firms are working to prevent the boom-and-bust cycle that has characterized the memory industry in the past. In this, they are entering long-term contracts with clients, setting the floor and ceiling prices of their products. 

At the same time, there are signs that these companies are trading at bargain prices. Seeking Alpha data shows that Micron trades with a forward price-to-earnings ratio of 13, while SanDisk has a multiple of 7.64%. Western Digital has a forward PE ratio of 25. 

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These multiples are not all that big for companies demonstrating this revenue growth. Most notably, companies are intensifying their spending, with the WSJ estimating that big-tech names are spending $3 trillion more than it seems as they are putting their numbers in off-balance-sheet instruments. 

DRAM ETF technical analysis

DRAM ETF chart | Source: TradingView

Technicals suggest that the DRAM ETF has made a strong rebound in the past few weeks. It is in the process of forming an inverted head-and-shoulders pattern, a common bullish reversal sign. The fund has also moved above the 50-period moving average and the strong, pivot, reverse level of the Murrey Math Lines tool.

Therefore, the path of the least resistance for the fund is bullish, with the next key level to watch being the Major S/R pivot point of $62.