These signs indicate that Solana is due for an immediate reversal

These signs indicate that Solana is due for an immediate reversal

Solana has extended its correction for five days, having lost 13% of its value from an all-time high of $260. With the MACD and RSI lining up chances of further losses yet, SOL could stretch towards the 50% Fibonacci level, over the near-term.

As the Bollinger Bands and RSI reach oversold territory, expect bulls to mount a comeback before SOL tags its defenses below $218.3. At the time of writing, SOL traded at $227.4, down by 6% over the last 24 hours.

Solana 4-hour Chart

Considering a bearish crossover between the 50-SMA (yellow) and 20-SMA (red) , SOL could weaken below the 38.2% Fibonacci level as sellers continue to drive the market. Should a double bottom at $220 fail to prop SOL back up on the chart, the price would be exposed to another 5% sell-off towards the 50% Fibonacci level.

Additionally, the 61.8% and 78.6% Fibonacci levels could help generate a bullish reversal as well. The former support area coincided with the 12-hour 50-SMA (not shown) while the latter clashed with the 4-hour 200-SMA (green). In case sellers are able to drive past these defenses, SOL’s downtrend could stretch all the way to its September lows of $124.15 or even $115.88.

Reasoning

There were a few interesting observations on SOL’s indicators despite bearish readings. For instance, SOL was oversold after trading on the lower band of the Bollinger Bands and was due for a reversal. SOL was not far away from the oversold territory on its 4-hour RSI as well.

Such readings could allow buyers to inject momentum back into the market. On the downside, MACD would not lend a helping hand to bullish traders. The index was trading at a 1-month low and showed no signs of a reversal in movement just yet.

Conclusion

The 38.2% Fibonacci level and a double top at $220 were SOL’s best chances of an immediate reversal. Oversold readings on the Bollinger Bands and RSI would aid buyers in a recovery as well. However, traders should be cautious of a close below the 78.6% Fibonacci level as this could transpire into heavy losses over the longer run.

Source

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