solana (SUN) is at risk of collapsing 35% in the next few days as it gets closer to painting a pattern called a "megaphone".
SOL price "megaphone" pattern
In detail, megaphone settings they consist of a minimum of lower lows and two higher highs and are formed during a period of high market volatility. But generally, these patterns consist of five consecutive swings, with the last one usually acting as a breakout signal.
SOL has been drawing a similar pattern since early 2022, with the currency suffering a setback after testing the upper megaphone trend line near $140 as resistance โ the fourth wing.
As a result of the pattern, the Solana token could extend its decline to test the lower megaphone trend line for support near $65, roughly 35% below current price.
Could SOL collapse further?
If this scenario plays out, SOL could collapse further after forming the fifth swing in its predominant megaphone structure. While finding a perfect downside target on a breakout is tricky, traders usually select it by measuring the distance between the two trendlines from the point where the bottom one breaks and book profits when price hits 50- 60% of that distance.
A bearish breakout risks putting SOL price on track to nearly $40 in the coming weeks.
A throwback scenario
On the other hand, SOL's bearish megaphone setup might not reach its breakout target as its price remains above a flurry of concrete support levels.
These levels include the 50-week exponential moving average of the SOL (50-week EMA; the red wave) and an upward sloping trend line (the black line) that have served as accumulation zones for traders, as shown in the chart below.
As a result, an early pullback of the 50 week EMA could invalidate the bullhorn scenario.
Suppose the price breaks below the 50 week EMA, only to look for a bounce off the rising trend line support. In that case, it could confirm the presence of a โrising wedgeโ or โbear flagโ setup in conjunction with the upper trendline of the megaphone pattern, again a bearish setup.
The rising wedge downside target it appears to be near $60 after measuring the maximum distance between its upper and lower trend lines (around $40) and subtracting it from the potential breakout point near $100.
Related: Profit-taking and Bitcoin consolidation give bears a chance to take control
Meanwhile, the bear flag negative goal it is close to $30 after calculating the height of its previous uptrend (around $60) and subtracting it from the potential breakout point near $90.
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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