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Two weeks ago, Solana (SOL) was riding a wave of optimism as its price surged to a peak of $163.60, igniting hopes of a return to the $200 mark. However, the bullish momentum that drove this rally has since faded, with SOL now trading at $140.39, marking a 15% decline from its recent high. The cryptocurrency market, known for its volatility, now raises the question: could Solana’s price dip further, possibly below the critical $130 support level?
Bearish Momentum Signals A Potential Downturn
As of this writing, the Moving Average Convergence Divergence (MACD) indicator on the SOL/USD daily chart has turned negative, signaling a potential trend reversal. The MACD, a widely used tool in technical analysis, is designed to detect changes in the momentum of an asset’s price. It does so by comparing two Exponential Moving Averages (EMAs): a shorter 12-day EMA and a longer 26-day EMA.
When the MACD line crosses below the signal line, it typically indicates a bearish trend, suggesting that downward momentum is building. In Solana’s case, the 26-day EMA has crossed above the 12-day EMA, reinforcing the bearish outlook. This crossover, coupled with the negative MACD reading, suggests that the recent decline in SOL’s price could extend further.
Technical Patterns and Support Levels
Analyzing SOL’s price movements, it’s evident that the cryptocurrency attempted a V-shaped recovery between July 31 and August 10. This pattern, characterized by a sharp decline followed by an equally rapid recovery, often signals a potential reversal. However, SOL’s price failed to sustain this momentum, facing rejection at the $163.60 level.
Since then, Solana has struggled to regain its footing, with the price now hovering near a crucial support level at $131.06. If bulls can defend this support, there may be hope for a rebound, potentially pushing SOL back to the $142.09 or even $151.98 levels. However, if selling pressure intensifies and the price breaks below $131.06, the next support level at $121.09 could come into play.
Indicators Point to Further Downside Risk
Adding to the bearish sentiment is the Awesome Oscillator (AO), another technical indicator that measures market momentum. Currently, the AO is in negative territory, indicating that the upward momentum that previously supported SOL’s price has weakened. This aligns with the negative MACD reading, reinforcing the view that SOL’s price may face further declines.
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Moreover, the Fibonacci retracement levels suggest that if SOL fails to hold the $131.06 support, the price could retrace to $129.85. Conversely, a successful defense of this support might open the door for a recovery, albeit within the confines of the $142.09 to $151.98 range.
Solana’s recent price action reflects the challenges it faces in a bearish market environment. While the potential for a rebound exists, particularly if key support levels hold, the current technical indicators suggest that the path forward may be rocky. Traders and investors should closely monitor these levels, as a break below $130 could signal further downside for SOL.
Disclaimer: The information in this article is for general purposes only and does not constitute financial advice. The author’s views are personal and may not reflect the views of Chain Affairs. Before making any investment decisions, you should always conduct your own research. Chain Affairs is not responsible for any financial losses.
A lifelong learner with a thirst for knowledge, I am constantly seeking to understand the intricacies of the crypto world. Through my writing, I aim to share my insights and perspectives on the latest developments in the industry. I believe that crypto has the potential to create a more inclusive and equitable financial system, and I am committed to using my writing to promote its positive impact on the world.
