Solana (SOL) has been one of the standout performers in the cryptocurrency market this year, with an impressive price increase of over 500% year-to-date. However, recent indicators suggest that SOL may be due for a temporary correction before its bullish momentum resumes.
The Tom DeMark Sequential Indicator, also known as the TD Sequential, has signaled a potential trend exhaustion point for SOL. On Solana’s weekly chart, a green nine candlestick formation has appeared, indicating a bearish signal. This sell signal is further supported by the Relative Strength Index (RSI), which is currently in the overbought territory with a reading of 75. An overbought RSI suggests a potential trend reversal or corrective price pullback.
If these bearish signs materialize, Solana could experience a spike in profit-taking, leading to a correction that could last for one to four weekly candlesticks. The TD Sequential is a technical analysis tool designed to identify potential buying and selling opportunities by predicting trend exhaustion points. It focuses on two main components, the TD Setup and TD Countdown, to detect trends that have become overextended and are likely to reverse. On the other hand, the RSI serves as a momentum indicator, comparing an asset’s upward price gains to its downward price losses.
To identify potential support and resistance levels for SOL, traders often use the Fibonacci Retracement Indicator. This technical tool utilizes a series of numbers to predict potential reversal points after a significant price movement. By dividing the vertical distance between an asset’s high and low points by key Fibonacci ratios (23.6%, 38.2%, 50%, 61.8%, and 78.6%), the indicator helps determine potential price levels for support and resistance.
The Fibonacci Retracement Indicator suggests that an increase in selling pressure could push SOL down to the 78.6% retracement level at \(47.6. If this support level fails, a steeper correction to the 61.8% retracement level at \)35.8 could occur.
In order to negate this pessimistic outlook, SOL’s price would need to close above the recent high of \(68.4 on a weekly candlestick. Such a breakout could attract interest from sidelined investors and potentially drive Solana's price to a new yearly high of \)108.
As with any market analysis, there are no guarantees, and investors should exercise caution and conduct their own research. However, considering the recent indicators, it is advisable for Solana investors to be prepared for a potential correction in the near term.