Solana (SOL) price may drop to $70 per token in the coming weeks, as a head and shoulders setup emerged on the daily time frame and possibly points to a drop of over 45%.
The chart below shows that the price of SOL rose to almost $217 in September 2021, fell to a support level near $134, and then moved to set a new high of $260 in November 2021. Earlier this week, price pulled back to test the same $134 support level before hitting a 2022 low at $87.73..
This phase of price action appears to have formed a head and shoulders setup, a bearish reversal pattern containing three consecutive peaks, with the middle one around $257 (called the “head”) which happens to be taller than the other two at around $200 to $210 (left and right shoulders).
Meanwhile, all three SOL peaks have been placed above a common support level at $134, called the “neckline”. A drop below it signals an extension of the downtrend to the level of length equal to the maximum distance between the head and the neckline..
In the case of SOL, the distance is about 137 dollars, which places its head and shoulders price target at almost $170.
The trend so far
The bearish outlook came as SOL price dropped over 22% this week and the altcoin is currently around 55% from its all-time high., very much in line with other large-cap digital assets including Bitcoin (BTC) and Ether (ETH).
At the heart of the current cryptocurrency market crash is the decision by the US Federal Reserve of unwinding its $120bn-a-month asset purchase program, followed by three or more interest rate hikes spread out over 2022.
Loose monetary policies from the central bank had helped pump the cryptocurrency market valuation from $128 billion as of March 2020 to a high of $3 trillion in November 2021.. Therefore, evidence of tapering has been influencing investors to limit their exposure to over-pumped markets, including Solana, which had gained nearly 12,500% since March 2020.
As a result, If the cryptocurrency market continues to decline in the coming sessions, SOL will also be at risk of validating its head and shoulders setup..
SOL Short-Term Outlook
While SOL’s longer time frame chart is leaning towards a long bearish setup, its short-term outlook looks comparatively bullish..
This is mainly due to two factors. First of all, SOL price has dropped to a critical support level of $116 which was instrumental in limiting his drop attempts in September 2021. And secondly, its daily relative strength index (RSI) dipped below 30, which is a classic buy signal.
The views and opinions expressed here are solely those of the author and do not necessarily reflect the views of Cointelegraph.com. All investments and trading involve risk, so you should do your own research when making a decision.
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