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Solana (SOL) Risks Steep Correction Following Short-Term Breakdown

2 mins
Updated by Geraint Price
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In Brief

  • SOL has broken down from an ascending wedge.
  • There is resistance at $44.50.
  • SOL might have created a long-term double bottom pattern.
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Solana (SOL) has broken down from an ascending wedge and is at risk of invalidating a long-term double bottom pattern. If this happens, the price would be expected to fall below its yearly lows at $25.86.

The weekly chart shows that SOL has nearly returned to its yearly low of $25.85, after seemingly initiating an upward movement in June. This movement has potentially created a double bottom pattern, which has also been combined with bullish divergence in the weekly RSI.

The price of blue chip SOL non-fungible tokens (NFTs) has also been increasing over the past two weeks, potentially preceding an increase in price.

However, the pattern has not yet been confirmed, since the second bottom has not been created, and could be invalidated with a continued decrease.

Double bottom
SOL/USDT Chart By TradingView

SOL breaks down

Despite the potential long-term bullish pattern, the daily chart provides a bearish outlook. The price had been increasing inside an ascending wedge since reaching a bottom on June 14. The ascending wedge is considered a bearish pattern, meaning that an eventual breakdown from it would be expected. 

On Aug 14, the price reached the resistance line of the pattern and seemingly moved above $44.50 (red circle). 

However, it was rejected by the resistance line and the purported breakout turned out to only be a deviation. 

SOL has been decreasing since and broke down from the wedge on Aug 18. The price reached a low of $30 on Aug 29. It created a bullish engulfing candlestick and has been increasing since. 

If the upward movement continues, the main resistance levels would be at $37, $39.20 and $41.40. These are the 0.382, 0.5 and 0.618 Fib retracement resistance levels, respectively.

SOL Wedge Breakdown
SOL/USDT Chart By TradingView

Wave count analysis

Finally, the wave count suggests that the price has been mired in a five-wave downward movement since the all-time high price in Nov 2021. 

If so, it is currently in wave four, potentially completing a fourth-wave pullback. Then, the two main targets for the bottom of the move would be at $19.77 and $12.10, created by the 1.27 and 1.61 external Fib retracement levels, respectively.

An increase above the wave four high at $48.38 (red line) would invalidate this particular wave count.

SOL Wave count
SOL/USDT Chart By TradingView

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Valdrin Tahiri
Valdrin discovered cryptocurrencies while he was getting his MSc in Financial Markets from the Barcelona School of Economics. Shortly after graduating, he began writing for several different cryptocurrency related websites as a freelancer before eventually taking on the role of BeInCrypto's Senior Analyst. (I do not have a discord and will not contact you first there. Beware of scammers)
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