$DRAM into the print at $46.39, with the shorts already gone

DRAM reports today, Oct 20, and it's sitting at $46.39, down 4.0% on 0.1x normal volume. Nobody is in a hurry. A tape that quiet on event day is either apathy or patience, and I lean patience.

So I'm leaning long through the print. Target is $50.10, which is 8.0% higher and one implied move. The idea is wrong at $44.16. I'd rather give you the exit before the entry thesis.

A tape that stopped selling

The lows at $48.64 got swept and reclaimed. That's the classic stop run before an event: take out the obvious level, collect the orders, hand the chart back. Price is also in the discount end of its range, 0% up from the low, and the tape leans toward accumulation. Leans. Price is back under that level today, which is why I call this a lean and not a signal.

Dark pool is no help either way. No block prints, 25% off-exchange, all of it spread across small tickets that look like internalized retail. So no big hand is showing itself. If size is buying, it isn't advertising.

Shrinking less is still a story

Last quarter revenue fell 7.4% year over year. The quarter before that it fell 18%. That's still a decline, and I won't dress it up as growth, but the slope has changed, and memory names trade on slope.

Gross margin is 15.5%, up 2.5 points on a year ago, and the eight-quarter trend adds 0.5 points a quarter. Thin margin, moving the right way. A company that's shrinking more slowly while earning more on each dollar doesn't need a miracle to print something the market likes.

The bull case

• Stops swept and reclaimed before the event
• Revenue decline easing from -18% to -7.4%
• Gross margin up 2.5 points to 15.5%
• Price in the discount end of its range

The bear case

• Unfilled imbalance at $49.34 to $50.13 pulls price down on a miss
• Supply blocks at $49.73 and $51.57 cap the move
• Neutral backdrop and no block buying in the dark pool
• Revenue is still shrinking

Nobody left to squeeze

Short interest is down 62.9% since the last report. It's 12.5M shares now, days to cover 1.0. Squeeze risk reads 23 of 100 and shorts pressing 38. That's ordinary positioning, so I'm not buying a squeeze. Whatever upside shows up has to come from the numbers and the guide.

The sheet tells short sellers to stand aside. I agree, for a plainer reason: most of the pressing is done and the cover is banked. Pressing now means selling into a stock that already shook out its weak longs.

Where it gets sticky

Overhead there's an unfilled bearish imbalance from $49.34 to $50.13, and it works as a magnet if the print disappoints. A supply block sits at $49.73, with the swing high at $48.46, a demand block at $48.26 and another supply block at $51.57. My $50.10 target lands inside that imbalance on purpose. I'd rather sell into the zone than hope through it.

The sheet's trigger is holding above $58.01, the anchored VWAP. That doesn't square with a $46.39 tape and I'm not leaning on it. What I trust is the confirmation: the first 30 minutes after the print holding the gap. If the opposite gap holds through the first hour, I'm out and I'm not arguing.

The backdrop doesn't help much. It's neutral, bias at -13. Crowd sentiment is bullish at 54, which is barely a crowd. And the daily is printing a spinning top, a long-legged doji and a dragonfly doji in a flat trend. That's indecision with a slight lean toward buyers defending the low.

Kill switch

Any one of these and the thesis is over, no averaging down, no renaming it.

• Price trades through $44.16
• The opposite gap holds through the first hour
• The first 30 minutes after the print fail to hold the gap
• Price gets rejected inside the $49.34 to $50.13 imbalance on a disappointing print

Bottom line

I like the setup because the bad news looks priced and the shorts have already left. I don't love it, because the path to $50.10 runs through supply and the tape is thin. Take the gap if it holds, and don't marry it if it doesn't.

The desk leans bullish. Bull or bear, the kill switch above is what keeps either call honest.

Sources and further reading: SEC EDGAR filings for DRAM · FINRA daily short sale volume files · Nasdaq short interest: DRAM · Nasdaq earnings page: DRAM · DRAM quote, chart and data on StockMarketLoop.

Data as of Oct 20, 8:41 AM ET from the Making Easy Money Academy data desk: options positioning, FINRA short volume, the off-exchange trade record, the structure map, SEC filings and the ticker's headlines. Vaughn McNair and the Making Easy Money publication may hold or trade positions in the names discussed. This is speculation and education, not financial advice.