Solana price has started to consolidate in a tighter range and if the broader market remains stable, SOL may break out in the short term.
The upside potential of SOL in the short term could be significant and the move itself would come quickly. The 2022 volume profile between $53 and $90 is extremely thin, indicating that any daily close above $53 would easily move to the next high volume node in the $90 value zone.
Also, the 50% Fibonacci retracement from the all-time high to the weekly low of Jul 26, 2021 and the 2022 volume checkpoint also exist in the $90 price zone.
Bullish traders should anticipate some resistance for the SOL price near the Kijun-Sen and the 61.8% Fibonacci retracement near the $70 price range. However, given how thin the volume profile is, that resistance may be short-lived.
Historical data suggests that sales may struggle to pin the SOL below $50
Downside pressure remains a concern, but its size and scope are likely to be limited. The triangle pattern on the daily chart shows that the bulls have made another attempt to push the SOL up and out, but have so far been rebuffed from spending any significant time above the upper trendline.
If a bearish break below the triangle occurs, bulls will understandably panic, but bears should not get too confident. Even though the 2022 volume profile is scant below the $39 price level, the 2021 indicator also shows considerable participation between $41 and $48.
Another quick sell off towards $39 is likely if SOL closes the daily candle at or below $49.
Time cycles indicate that a trend reversal may start soon
Solana’s price action is poised for a substantial upside bounce from a time cycles perspective. In Gann’s analysis, one of the most powerful time cycles is the 180-day cycle (which extends to 198 days). Gann noted that any instrument that trades in one direction for 180 days has a high probability of generating a powerful corrective move or major trend reversal.
Today (May 23, 2022) is the 196th day since the all-time high made on November 8, 2021.
Complementing Gann’s 180-day cycle is an event within the Ichimoku Kinko Hyo system: a Kumo Twist. A Kumo Twist is the period of time when Senkou Span A crosses Senkou Span B. In addition, the color change of the cloud can be observed. Kumo Twists have a high probability of identifying when a new swing low/high may occur.
Macroeconomic data will continue to weigh on cryptocurrencies
Solana and the cryptocurrency market in general remain at the mercy of the stock market. While the stock market has mounted a modest rally during the May 23 session, all four major indices are in or near bearish territory.
For example, the RUSSELL 200 (IWM) is down -27%, the NASDAQ (NDX) is down -28%, and the S&P 500 (SPY) reached bear market territory on Friday May 20, 2022, but today has dragged out of it. Still, the index remains close to bear market conditions at -17%. Only the DOW has remained outside of bear market territory.
Volatility is also expected to be exceptionally high this week. New home sales data is published on May 24, durable goods data on May 25, GDP growth rate on May 26, and personal income and spending (MoM) on May 27.
Any bearish or bullish price action in the stock market is expected to be reflected in the cryptocurrency market.
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