After reaching a new multi-month low, Solana (SOL) is attempting to hold a key high-timeframe level as support ahead of week’s end. Some analysts have suggested that the altcoin is poised to bounce, but others warned that a potential rally could be short-lived.
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Solana To Tag Higher Levels Soon
On Friday, Solana recovered from the latest drop and surged 7.7% toward the $125 area. The cryptocurrency fell nearly 9% on Thursday afternoon amid a broader market correction, sending its price to an eight-month low of $116.
Amid the pullback, SOL’s price breached below a crucial high timeframe level, the around $120 mark, for the first time since April before recovering. Analyst Crypto Batman noted the altcoin “is not only at its major support level, the same one that has held price for the past 2 years.”
In addition, the cryptocurrency is also forming a bullish divergence on the 3-day timeframe, “exactly like what we saw before the major bottom” at the start of Q2, the market observer added.
To him, this suggests that Solana could bottom soon and see the start of a recovery rally to the macro range highs. However, another market observer affirmed that even if a retest of the higher levels is likely, “context matters here.”
Analyst Crypto Scient highlighted that SOL’s price is currently at the range lows of its multi-year range, recording the first retest of this area after being rejected from the range highs.
“One could argue SOL has been distributive for nearly two years now. That’s fair,” he explained, “[but] range lows rarely break on the first attempt.” Moreover, Scient pointed out that there’s significant liquidity left between the $175–$190 levels that “should get tagged at some point, even within a broader bearish environment.”
As a result, the analyst considers that a “move higher to clean liquidity before any deeper downside would make far more sense.”
December Close To Define SOL’s Fate?
Analyst Rekt Capital affirmed that the $123 horizontal support remains the “defining level” that Solana must hold to prevent a major breakdown to multi-year lows.
He detailed rebounds from this support have historically produced “outsized upside expansions,” with 140% and 100% moves. However, each rebound from this level has been progressively weaker over time, with the most recent bounce only managing to rally 15%.
This signals a “sharp deceleration in upside responsiveness at this level,” which is important to consider as the compression in rebound magnitude could affect SOL’s monthly close.
According to the analysis, a monthly close above the macro support would keep Solana positioned for a weaker rally, but a close below $123 would substantially change the structure.
The second case would suggest that distribution has already started and confirm “how much this support has weakened since the last meaningful rebound that produced a near 2x move earlier this year.”
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Moreover, it would begin to mirror SOL’s performance in early 2022, when a similar price action preceded “macro relief moves during the opening phase of the Bear Market, including the decisive breakdown that occurred at the turn of that year.”
Ultimately, the analyst warned that it remains to be seen whether the altcoin can close December above this crucial level and rebound, or if a breakdown “accelerates distribution sooner rather than later.”
As of this writing, Solana is trading at $126, a 3.4% decline in the weekly timeframe.
Featured Image from Unsplash.com, Chart from TradingView.com