Solana’s SOL price is at risk of losing almost half of its value in the coming weeks due to a classic technical setup that could lead to a potential 40% crash.
The bearish divergence observed in Solana’s price limits its upside potential. Currently trading at around $76.35 as of December 19th, SOL has seen a 50% increase compared to its local price low of $51 a month ago.
However, the rally in SOL lacks the necessary momentum to sustain the upward trend. The cryptocurrency’s relative strength index (RSI) has dropped from 90 to around 73 on its three-day chart, forming lower highs while the price continues to reach higher highs.
A similar bearish divergence can be seen between SOL’s rising price and the declining three-day trading volumes. This indicates a potential loss of strength in the current bullish trend, suggesting a reversal may be on the horizon.
In recent days, SOL’s price has stabilized around $73, which coincides with its 0.236 Fibonacci retracement line that served as support earlier in Q1 2022.
If a correction does occur following SOL’s bearish divergence signals, the target price for the bearish trend is a 40% drop towards its 50-3D exponential moving average (EMA) near $42 by January 2024.
However, independent analyst Cold Blooded Shiller sees the bearish divergence as a buying opportunity in the event of a selloff. He believes it indicates a higher chance of getting cheaper prices to buy at, rather than signaling a macro crypto top.
On the weekly timeframe chart, Solana’s market corrections in the past have often found support near an ascending trendline. Therefore, a move towards the trendline at around $40 could reignite bullish sentiment. Traders may also be inclined to buy SOL near the 0.786 Fib line around $55, which has turned from resistance to support.
To confirm a bearish trend reversal, SOL’s price must drop below these two support levels. If it doesn’t, there is a possibility that the price may rise towards $100 in early 2024.
Please note that this article does not provide investment advice or recommendations. It is important for readers to conduct their own research before making any investment or trading decisions.
New Year’s may bring a 40% crash for Solana, according to technical indicators.