The Solana token market has transitioned back to a negative territory, showing a 2.49% decline in the last 24 hours, along with a surge in trading volume. This combination indicates a potential further weakening of the market.
An analysis by CryptoCrypto delved into whether this bearish sentiment signifies a temporary fluctuation or if it could persist over an extended period.
Potential Price Decline Due to Consolidation Channel
Solana has been engaging in trade within a consolidation channel on the 4-hour timeframe since early September.
This pattern involves price fluctuations within tight confines as traders await clear signals for the next breakout, whether upwards or downwards.
Although SOL briefly surpassed the upper boundary of the consolidation channel, peaking at 139.80, it has since retreated back within the channel’s limits.
This scenario is known as a ‘fakeout,’ which suggests an impending reversal in price direction. For Solana, this indicates a possible downward trajectory.
If the downward pressure continues, SOL could breach the channel and possibly target the liquidity zone marked at 120.00.
Bearish Signals from Technical Indicators for SOL
The Moving Average Convergence and Divergence (MACD), identified by a yellow circle, reveals a ‘death cross’ where the blue MACD line has crossed under the orange signal line.
This cross indicates a bearish trend, signaling that market participants are more inclined to sell rather than hold or buy more SOL.
Additionally, the Relative Strength Index (RSI) aligns with a bearish outlook. Presently, the RSI stands at 41.29, below the neutral 50 level, indicating a downtrend. A further drop in the RSI could suggest additional losses for SOL.
The MACD acts as a momentum indicator to spot potential shifts in market direction, while the RSI serves as a momentum oscillator gauging speed and price movement changes, identifying overbought and oversold conditions to anticipate possible price reversals.
Overall Bullish Market Prospects for SOL
An examination of the weekly timeframe chart shows that SOL is currently within a consolidation phase reminiscent of the pattern observed before it reached its all-time high in 2021.
If SOL breaks out of this consolidation phase, it could potentially achieve a new all-time peak, mirroring its performance in 2021.
Despite short-term bearish signals, the broader analysis indicates that SOL is gearing up for a substantial rally.