Key Points:
- Reclaiming $22.5 crucial for SOL’s recovery.
- Breaker block & Fibonacci levels hint sentiment shift.
- Declining volume & open interest signal bearish sentiment.
The prospect of a recovery for SOL remains contingent upon its ability to reclaim the $22.5 level and establish it as a solid support after recent declines.
The SOL market has displayed a bearish trajectory on the price charts since late July. The bulls struggled to breach the resistance around the $25 mark, resulting in a sharp descent below $22.5 over the last week.
Key interest for SOL bulls was centered around the higher timeframe range, particularly the pivotal $20 psychological level. Present indicators indicated a prevailing advantage for sellers in the current market conditions.
The convergence of the breaker block and Fibonacci levels might trigger a shift in SOL sentiment.
Highlighted within the cyan box at $20.1-$22.2, the 1-week timeframe chart revealed a bullish breaker block. Initially a resistance point in early June, it transitioned to a support level during the July rally. At present, Solana’s trading activity took place within this range, with the $20 psychological level in proximity.
Analysis of the 1-day chart outlined a bearish market structure, following SOL’s formation of a lower high at $25.68 and a lower low at $22.23 on August 5th. Subsequent weeks demonstrated the development of a downtrend based on this structure.
In the past week, the Relative Strength Index (RSI) indicated a bearish momentum. The On-Balance Volume (OBV) displayed declining demand for SOL as evidenced by lower highs since mid-July. This scenario cast doubts on the potential for a recovery. Furthermore, the moving averages teetered on the brink of signaling a downtrend.
The waning trading volume and Open Interest underscored the prevalent bearish sentiment.
Data from Santiment illustrated diminishing trading volume since June, coinciding with a consistent decline in prices. This implied that participants in the Solana market seemed to adopt a cautious stance, possibly in anticipation of a robust uptrend before committing.
While the funding rate exhibited negativity in recent days, it experienced an uptick above 0 within the last few hours. This development alone did not necessarily indicate a shift in sentiment, but it suggested that the bulls might manage to arrest the ongoing downtrend.
Conversely, Open Interest reflected a persistent bearish sentiment within the market. Despite SOL finding itself at long-term support, the substantial decline in Open Interest over the previous ten days failed to reverse the downtrend.
In light of these factors, the possibility of SOL dropping below the $20 support level remains a plausible scenario. Bulls should prepare for the eventuality of exiting the market under such circumstances. A more promising scenario for recovery would materialize if SOL can reascend beyond $22.5 and subsequently validate it as a support level.
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