Key points to remember
- Solana is nearly 70% off its all-time high of November 2021.
- Now, the Layer 1 token appears to be in oversold territory.
- Cutting through the $88 resistance could result in a move higher to $120.
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Solana has not recovered lost ground since its peak despite the bullish momentum seen in other Layer 1 tokens. Still, technical data predicts that SOL’s trend may soon reverse to the upside.
Solana prepares to recover
Solana could finally be ready for an upward move.
The Layer 1 token is currently in a downward spiral, but several technical indicators suggest that its trend may be improving.
After declining since its November 6 peak, SOL is nearly 70% off its all-time high. This is a stark contrast to other Layer 1 tokens such as Terra’s LUNA, which shook off tough market conditions and broke a new all-time high on Wednesday. SOL, meanwhile, lags behind. Still, there are a few reasons to believe Solana’s corrective phase may soon be reaching exhaustion.
SOL price appears to be forming a bullish divergence from the Relative Strength Index on its daily chart. As it continues to make a series of lower lows, the RSI has made a series of higher highs. Such market behavior indicates increasing upward momentum, hinting that a break out of oversold territory may be near.
Additionally, the recent downward price action appears to have led to a descending wedge forming on Solana’s daily chart. As SOL gets closer to the top of the pattern, it could be preparing to break through resistance. A decisive close below the upper trendline of the wedge could result in a 34% upside towards $120.
Given Solana’s poor performance over the past few months, it remains to be seen if he will be able to gain the strength he needs to break out. Breaking above the $75 support level could show further signs of weakness, encouraging market participants to exit their positions. A spike in sell orders could invalidate the bullish outlook and lead to a sharp correction to $54.
Disclosure: At the time of writing this article, the author of this article owned BTC and ETH.
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