solana (SUN) price may drop to $70 per token in the coming weeks as a head and shoulders setup emerged on the daily time frame and possibly points towards a decline of over 45%.
The graph below shows that The price of the SOL recovered at almost $217 in September 2021, it fell to a support level near $134 and then moved to set a new high of $260 in November 2021. Earlier this week, the price fell again to test the same $134 support level before breaking to a 2022 low at $87.73.
This phase of price action appears to have formed a head and shoulders setup, a bearish reversal pattern containing three consecutive peaks, with the middle one around $257 (called the head) being higher than the other two around $200 a $210 (left and right shoulders).
Meanwhile, all three peaks of SOL have been sitting on top of a common support level at $134, called the neckline. A drop below indicates an extended downtrend at the length equal to the maximum distance between the head and the neckline.
In the case of SOL, the distance is around $137, which puts its head and shoulders price target at almost $170.
The trend so far
The bearish outlook came as SOL price fell over 22% this week and the altcoin is currently around 55% off its all-time high, very much in line with other large-cap digital assets including Bitcoin (BTC) and ether (ETH).
At the center of the ongoing crypto market slump is the decision by the United States Federal Reserve to relax its $120bn-a-month asset purchase program followed by three or more interest rate hikes spread throughout 2022.
The loose monetary policies of the central bank helped to increase the valuation of the crypto market from $128 billion since March 2020 to a high of $3 trillion in November 2021. Thus, evidence of the drawdown has been influencing investors. to limit its exposure to overexploited markets. โ including Solana โ which had gained nearly 12,500% since March 2020.
As a result, if the crypto market continues to drop in the coming sessions, SOL will also risk validating its head and shoulders setup.
SOL Short Term Outlook
While SOL's longer time frame chart is leaning towards a long bearish setup, its short-term outlook looks comparatively bullish.
Related: Bitcoin falls to six-month lows near $38K
That is mainly due to two factors. First, SOL price has fallen to a critical support level of $116, which was instrumental in limiting its downward attempts in September 2021. And second, its daily relative strength index (RSI) fell below 30 , a classic buy signal.
The views and opinions expressed here are solely those of the author and do not necessarily reflect the views of Cointelegraph.com. Every investment and trading move involves risk, you should do your own research when making a decision.
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