An analyst explained how Solana may be at risk of a correction based on the data from two SOL technical indicators.
Solana has recently observed the formation of two bearish signals
In a new after at X, analyst Ali discussed why SOL could be at risk of seeing a retracement soon. The analyst has referred to two technical indicators for the coin: the TD Sequential and RSI.
The first of these, the Tom Demark (TD) Sequential, is a benchmark generally used to spot likely reversal points in an asset’s price. The indicator has two phases, the first of which is a nine-candle long “setup” phase.
When nine candles of the same polarity follow a reversal in price, the TD Sequential setup is said to be complete and the asset can be considered to have reached a likely point of a trend shift.
If the candles are green, the completion of the setup would obviously point to a top, while red candles would imply a bottom formation. Once the installation is over, a thirteen candle countdown begins. At the end of these thirteen candles, another likely change in direction occurs for the chart.
According to Ali, a ramp-up phase has recently emerged for Solana. Below is the analyst shared chart showing this TD Sequential pattern in the weekly price of the cryptocurrency.
The trend in the 1-week price of the asset | Source: @ali_charts on X
The chart shows that the TD Sequential setup has recently completed with green candles, implying that the price may have already turned towards a bearish trend.
In the same chart, Ali also included the data for the second relevant indicator: the Relative Strength Index (RSI). The RSI is a momentum oscillator that tracks the speed and magnitude of recent changes in an asset’s price.
This indicator determines whether the asset is currently undervalued or overvalued. When the statistic has a value greater than 70, it may be a sign that the asset is overbought, while a value below 30 indicates an oversold condition.
As can be seen from the chart, the Solana RSI recently broke above 70 and stayed within this area, indicating that the SOL has recently been overvalued.
This would mean that there are currently two bearish signals looming over the cryptocurrency’s head. “A spike in profit taking could trigger a retracement to $47.6,” the analyst said. From the current price, such a potential correction to $47.6 would represent a drop of more than 20%.
Solana’s fate can still be averted; however, as the analyst explains, “SOL would need to push a weekly candlestick close above $68.4 to negate the bearish outlook and target $108.”
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Solana had risen above $65 yesterday, but the asset has already seen a pullback as it is now trading around $60.
Looks like SOL has gone through some drawdown during the past day | Source: SOLUSD on TradingView
Featured image from Shutterstock.com, charts from TradingView.com
