Solana (SOL) has experienced a substantial drop of over 16% in the past 24 hours, causing its market cap to fall below $70 billion due to heightened selling pressure. This sharp decline comes after a recent surge to $178 following its addition to the US strategic crypto reserve. However, the initial momentum has waned, resulting in a significant pullback.
Technical indicators such as the Ichimoku Cloud and Directional Movement Index (DMI) indicate that SOL is currently in a bearish phase with continued downside risks. Should SOL stabilize and reclaim crucial resistance levels, a potential rebound towards $200 could be on the horizon in the upcoming weeks.
The SOL Ichimoku Cloud demonstrates a bearish setup, with the price trading below the cloud, affirming a downward trend. The rejection from the Tenkan-sen (blue line) and its downward slope signal short-term weakness.
The Kijun-sen (red line) positioned above the price signals a lack of bullish momentum, while the red future cloud formed by Senkou Span A and Senkou Span B suggests ongoing bearish conditions. Unless SOL manages to surpass key levels and break above the cloud, downside pressure is likely to persist.
The Solana DMI chart points out that the Average Directional Index (ADX) currently stands at 22.1, down from 30.5 at the start of the correction. The lowering ADX indicates a weakening trend strength, reflecting a shift from strong momentum to a more uncertain phase.
Although sellers are currently in control, the declining ADX and stable -DI suggest that selling pressure may be subsiding. If this trend continues, SOL might transition into a consolidation phase rather than extending the correction.
Despite the recent price decline, there is still a possibility for Solana to climb back to $200 in March. However, if the downtrend persists, SOL could drop further, potentially testing the crucial $125 support level. It is crucial for SOL to garner significant buying pressure to reverse the current bearish trend.
In the event of a trend reversal, SOL could challenge the $160 resistance level, a crucial area to observe for potential bullish momentum. Breaking above this level could propel SOL towards $180 and beyond, with $205 emerging as a significant resistance level to surpass.