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Thursday, December 8, 2022

Spooky Solana breakdown begins with SOL price facing a potential 45% drop — Here’s why

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Solana (SOL) dropped on May 26, persevering with its decline from the day gone by amid a broader retreat across the crypto market.

SOL price pennant breakdown underway

SOL price fell by over 13% to round $41.60, its lowest degree in nearly two weeks. Notably, the SOL/USD pair additionally broke out of what seems to be like a “bear pennant,” a classic technical pattern whose occurrences usually precede extra draw back strikes in a market.

In element, bear pennants seem when the price trades inside a vary outlined by a falling trendline resistance and rising trendline help.

Bear pennant sample. Source: ThinkMarkets

These patterns resolve after the price breaks beneath the decrease trendline, accompanied by larger volumes. As a rule of technical evaluation, merchants resolve the pennant’s revenue goal after including the size of the prior’s leg decrease (referred to as “flagpole”) to the breakdown level.

SOL has been undergoing a similar breakdown after closing below its pennant’s lower trendline on May 25, as shown below. In theory, Solana’s profit target comes to be near $23, down about 45% from May 26’s price.

SOL/USD daily price chart featuring ‘bear pennant’ setup. Source: TradingView

Nonetheless, SOL’s bear pennant breakdown appears without a spike in trading volumes, suggesting that traders are not fully convinced with the move. That could prompt the token to retest the pennant’s lower trendline as resistance.

Moreover, a successful retaking of the trendline as support risks invalidating the bear pennant setup while bringing the 20-day exponential moving average (20-day EMA; the green wave) near $57.59 in proximity as the next upside target.

Conversely, a pullback could keep SOL’s near-$23 profit target in view, with $35.50—the May 12 price floor that preceded a sharp rebound—serving as interim support. 

Solana price support confluence

SOL also trades near a support confluence, comprising multi-month horizontal and rising trendlines.

SOL/USD weekly price chart. Source: TradingView

The horizontal trendline near $45.75 served as resistance during the April–August 2021 session and later flipped to become support between January 2022 and March 2022. Simultaneously, the rising trendline has been capping SOL’s extended bearish attempts since March 2021.

Related: Assuming Bitcoin plays nice, higher timeframe analysis points to $90 Solana (SOL) price

As the 2 trendlines converge, they may change into a psychological entry level for buyers with a long-term upside outlook. That would imply SOL rebounding in direction of its subsequent upside goal close to $79, which additionally coincides with a multi-month falling trendline resistance.

On the opposite hand, a continued selloff within the Solana market would have SOL danger one other large decline, as mentioned within the bear pennant setup above.

The views and opinions expressed listed below are solely these of the creator and don’t essentially mirror the views of Cointelegraph.com. Every funding and buying and selling transfer includes danger, you must conduct your personal analysis when making a resolution.