Understanding a Double Bottom and the Beauty of Fundamentals and Technicals Coming Together

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Wednesday, November 16, 2022

In technical analysis, a stock bouncing upward off a similar area is deemed a “multiple bottom,” a support pattern that is highly sought by technical traders with little regard for fundamentals. A double or triple bottom can be a bit of a self-fulfilling prophecy when technicians are interested in the chart while fundamental traders are looking for value plays, a combination where buying begets more buying.

Historic examples of multiple bottom patterns are readily available, including Pfizer (NYSE: PFE), Advanced Micro Devices (NASDAQ: AMD), and ABIOMED (NASDAQ: ABMD).

Some current examples include Kodak (NYSE: KODK) and Solar Integrated Roofing Corp. (OTCPK: SIRC). SIRC is an example of not only multiple bottoms, but a fundamentally strengthening growth story. Solar Integrated Roofing is an integrated, single-source solar power, roofing systems installation and electric vehicle (EV) charging company specializing in commercial and residential properties throughout the U.S. The Nevada-based company's broad array of solutions include sales and installation of solar energy systems, battery backup and EV charging stations to roofing, HVAC and related electrical contracting work.

 Sans the close on June 13 at $0.135 that was short lived, SIRC has repeatedly attracted buyers around 15 cents, resulting in a pattern of bounces to create a multiple bottom. While double and triple bottoms are somewhat common, a quintuple bottom is much rarer, as the stock will typically make a bigger move away from the area rather than returning to the point so many times.

That’s what technical traders will be watching for now. They will join fundamental traders in looking for a catalyst (usually a piece of news) to carry the stock upward through any technical resistance.

For SIRC, the substantive resistance will be at 20-21 cents. The last two bounces have stalled there, plus it is the area of the 50 day moving average (DMA), which serves as dynamic resistance. There are many nuances to a double bottom pattern, including a resistance serving as a breakout point. That is the case with 21 cents. From there, the sky opens for SIRC. The next major resistance comes 53% up the road at $0.26, which is both static and dynamic (the 200 DMA).

Fundamentalists are watching SIRC develop at a torrid pace in 2022 on the back of organic growth and an aggressive acquisition strategy in recent years.

The company now has five revenue streams that resulted in a record performance in the second quarter. Revenue exploded to $66.3 million in Q2, up 746% from the year prior quarter. Net income for the quarter was $18.9 million. SIRC CEO David Massey recently said that the second half of the year is shaping up even better than the first.

The company is working to complete all its requisite audits and documentation to graduate to the NASDAQ in 2023 where it belongs considering the revenue volume and profitability.

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Solar Integrated Roofing Corp. (OTC: SIRC) Full Corporate Write-Up: Click Here.

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