- Solana (SOL) faces a potential 14% decline if it fails to break through the critical 200-day EMA resistance at $140.23, with on-chain data showing increased bearish sentiment and significant sell-offs by large investors.
- However, a daily close above this level could shift the outlook to bullish, leading to a potential 6% rise.
Solana (SOL) appears poised for a significant price drop as it struggles to surpass a critical resistance level, the 200-day Exponential Moving Average (EMA) at approximately $140.23. This key resistance point has proven challenging for Solana, which failed to break through it on Tuesday, leading to a bearish outlook for the cryptocurrency.
The on-chain data further reinforces this pessimistic perspective. Investors’ sentiment has turned bearish, as evidenced by the long-to-short ratio falling below one, indicating more short positions than long ones. Moreover, a significant holder has been offloading their SOL holdings, exacerbating the selling pressure.
Resistance at 200-Day EMA
On Saturday, Solana’s price broke below an ascending trendline that had been in place since late January, resulting in a 6% decline over the next three days. Although the price managed a 5% recovery on Wednesday, it began to dip again on Thursday, highlighting the persistent struggle to overcome the 200-day EMA resistance.
This resistance zone around $140.23 is crucial, coinciding with the broken ascending trendline and a 50% retracement level at $136.77. If Solana fails to break through this level, it could lead to a significant decline, potentially dropping 14% to retest the daily support level at $120.91.
Technical Indicators Signal Weak Momentum
The Relative Strength Index (RSI) and the Awesome Oscillator (AO) on the daily chart are currently below their neutral levels of 50 and zero, respectively, but remain above oversold territory. These indicators suggest weak momentum, further supporting the likelihood of a continued bearish trend for Solana.
On-Chain Metrics Indicate Bearish Sentiment
According to data from Coinglass, Solana’s long-to-short ratio stands at 0.89, the lowest since August 11. This ratio signifies that more traders are expecting the asset’s price to fall rather than rise.
Furthermore, Lookonchain data reveals that a whale or institutional investor has sold 695,000 SOL tokens, valued at $99.5 million, this year. Since January 1, this entity has sold an average of 19,306 SOL tokens, worth $2.76 million, weekly. The consistent selling by large investors tends to influence market sentiment, potentially leading to further declines in Solana’s price.
Potential for Reversal
A whale/institution sold 695K $SOL($99.5M) this year!
— Lookonchain (@lookonchain) September 3, 2024
Since Jan 1, this whale/institution has been selling an average of 19,306 $SOL($2.76M) weekly, totaling nearly $100 million worth of $SOL!
The whale/institution still has 1.88M $SOL($255.89M) staked.https://t.co/v6mJegPKCa… pic.twitter.com/3XHhPQJbdq
Despite the prevailing bearish outlook, there is a possibility for a bullish reversal if Solana’s daily candlestick closes above the 200-day EMA at $140.23. Such a move would invalidate the bearish thesis and could lead to a 6% rise, retesting the August 28 high of $149.30.
Solana’s price is currently at a critical juncture. Failure to overcome the 200-day EMA resistance could result in a significant decline, driven by weak technical indicators and bearish on-chain metrics. However, a breakthrough above this resistance could shift the market sentiment to bullish, offering a potential upside for the cryptocurrency.
