SOXL, DRAM Bulls Clash With Short Sellers, Unfazed by Micron's Slump: Short Seller Tracker

Bulls kept pouring money into $Roundhill Memory ETF (DRAM.US)$ and Direxion Daily Semiconductor Bull 3X ETF, undeterred by short sellers who piled in after $Micron Technology (MU.US)$, Samsung Electronics and $SK Hynix (000660.KR)$ tumbled from their peak.

Inflows into DRAM outpaced outflows by $65 million Tuesday, the 12th straight session of net injection into the ETF, according to data compiled by Bloomberg. Meanwhile, $Direxion Daily Semiconductor Bull 3x Shares ETF (SOXL.US)$ attracted more than $1 billion in net inflows, after a record $1.4 billion inflow Friday.

Money poured in at a time when short sellers were adding to their bearish wagers, compounding yesterday's decline. DRAM's daily short volume more than tripled to 9.06 million units of the exchange traded fund Tuesday, from 2.85 million units in the previous session, exchange data tracked by moomoo showed. The latest figure accounted for almost 13% of the units that changed hands that day, when the ETF slipped 1.1%.

In the case of $Direxion Daily Semiconductor Bull 3x Shares ETF (SOXL.US)$, short volume jumped to 16.83 million units, from 8.72 million on Monday. Short volume is the number of shares sold short in a day, a bet that the price will fall. A rising short volume percentage can signal traders expect more downside, which matters because it can speed up a decline.

Sentiment recentlyg turned negative as investors cashed in gains from the parabolic run that saw Micron jump more than 700% over the past year. Micron is among the three biggest holdings of DRAM and has a 4.4% weighting on SOXL. The recent sell-off accelerated after $Broadcom (AVGO.US)$ forecast weaker-than-expected fiscal third quarter AI semiconductor revenue growth, fueling concerns over the sustainability of demand growth for chips.

Worries over a pick up in inflation is also fueling concerns that the Federal Reserve may hike interest rates, adding to the negative sentiment. Higher interest rates hit memory stocks like Samsung and SK Hynix harder than most because their value rests on big, lumpy bets made today for profits years out — new fabs cost tens of billions and could take years to ramp, so investors discount those distant cash flows more heavily when rates rise.

At the same time, rate hikes can cool the economy, which hits PC and smartphone demand first (the price-sensitive buyers already being squeezed by 90%+ DRAM price jumps), while also raising borrowing costs for the hyperscalers who are prepaying for HBM.

Share your thoughts on Micron and other chip stocks and the ETFs that track them including DRAM and SOXL in the comments section. Can Micron shares hold on to this year's gains? Let your voice be heard by voting below.

Before investing in an ETF, you should read both its summary prospectus and its full prospectus, which provide detailed information on the ETF's investment objective, principal investment strategies, risks, costs, and historical performance (if any). You can find prospectuses on the websites of the financial firms that sponsor a particular ETF, as well as through your broker. Investment returns will fluctuate and are subject to market volatility, so that an investor's shares, when redeemed or sold, may be worth more or less than their original cost. ETFs are subject to market volatility and the risks of their underlying securities, which may include the risks associated with investing in smaller companies, international securities, commodities, fixed income, and more. An ETF may trade at a premium or discount to its net asset value (NAV).

192K Views