From running and executing smart contracts, financial apps, NFT’s and blockchain-based games, Solana has become quite popular over the past year. A more cost-efficient and scalable alternative to Ethereum, investments into Solana have seen a 10,000% spike in 2021. However, its price was not immune to broader market chances. A lengthy downtrend which started on 3 December dragged SOL’s value by nearly 40% to a 2-month low at $148. Although the market has recovered ground since then, a rising wedge has put SOL under the threat of a retracement. At the time of writing, SOL traded at $194, up by 3% over the last 24 hours.
Solana 4-hour time frame
Higher highs and higher lows have seen SOL take shape within a rising wedge over the past 10 days. The pattern is usually given a bearish bias as investors tend to cash in their gains once the price meets a resistance level. In this case, SOL’s resistance barrier lay between $204-$220. This region captured key swings highs formed on 22, 26 October and 4, 7 December – each of which have triggered several minor corrections previously. If SOL is unable to clear this barrier on strong volumes, a correction can be expected. Immediate support lines at $189.5 and $178.5 will offer an early pushback, while $168 support can counter a stronger sell-off. Overall, losses can be felt anywhere between 7%-17%.
Meanwhile, a decisive close above $220 would negate this bearish thesis. Once the liquidity pocket above $243 is overcome, SOL bulls can target new ATH’s.
Indicators
A quick look at SOL’s Relative Strength Index and Moving Average Convergence Divergence shows a bullish preference as each traded above their respective mid-lines. However, the formation of lower highs on each index indicated a bearish divergence with respect to SOL’s price action. This meant that the price was actually becoming week despite climbing to higher levels. Since this setup was approaching an important resistance, a juicy sell-sign would soon be on the table for trigger happy investors.
Conclusion
SOL’s rising wedge was nearing a critical resistance region. A retracement was expected anywhere between 7%-17% provided bulls fail to overcome $204-$220 on good buy volumes. Observers can wait for the anticipated response and time their entries at $178.5 or $168 to bag SOL at a discounted price level.