Solana – How a critical support level could stem the losses
Disclaimer: The information presented does not constitute financial, investment, trading, or other types of advice and is solely the writer’s opinion
- Solana seemed to have a bearish market sentiment, momentum, and price structure
- It also presented a possible high-reward buying opportunity in the event of another drop in prices
Solana [SOL] saw a hike in social dominance as news of the impending FTX liquidation seized more and more public attention. And yet, this spike came alongside a downtrend for SOL prices, muting speculation that market sentiment has reversed itself.
Read Solana’s [SOL] Price Prediction 2023-24
The asset saw rising Open Interest alongside falling prices last week to highlight the bearish sentiment. The price action showed another dip towards $17 was possible too. If this occurs, it could present a buying opportunity for longer-term traders.
The month-long downtrend has not halted yet
On the daily chart, Solana projected a bearish market structure. This occurred on 5 August when the price dropped below the recent higher low at $22.73. It saw a sharp move south in mid-August. In 8 days, SOL dipped by as much as 23.8% at its lowest.
In doing so, the bullish breaker block from the weekly timeframe above the $20-region was breached as support (red box). The Fibonacci retracement levels showed that the 61.8% level was at $20.18. The sellers managed to breach the confluence of this Fib level and the higher timeframe breaker block in a move that showcased their dominance.
Their hold of the market continues, and at press time, the downtrend and market structure remained unbeaten. The RSI was below neutral 50 to underline bearish momentum. The 78.6% retracement level at $16.94 is a line that the bulls must hold.
A test of this level can offer a buying opportunity targeting the local highs at $25.5, $29, and $32 (which is an ambitious target). If SOL falls below the $15.5-mark, it would invalidate the idea of a bullish reversal at the 78.6% level.
Market sentiment leaned in favor of the bears
On 10 September, the price fell from $19.6 to $17.8 and the Open Interest rose by close to $30 million worth of contracts. Combined with the heavy negative funding rate on that day, it presented evidence of a bearish conviction last week.
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Since then, the spot CVD has seen a bounce higher. The OI also climbed when SOL bounced from the $17.6-territory, showing buyers entering the market. This does not rule out the possibility of another dip, however, as the funding rate remained negative and spot CVD has flattened over the past few days.