After hitting a new multi-month low, Solana (SOL) is looking to hold the key timeframe highs as support heading into the weekend. Some analysts suggest that altcoins are poised for a rebound, but others warn that the potential rally may be short-lived.
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Solana quickly tags high level
On Friday, Solana recovered from its recent decline and rose 7.7% towards the $125 area. The cryptocurrency fell nearly 9% on Thursday afternoon amid a broader market correction, hitting an eight-month low of $116.
Amid the pullback, SOL’s price fell below an important high of around $120 for the first time since April, before recovering. Analyst Crypto Batman noted that the altcoin “isn’t just sitting at the same major support level that has been holding its price for the past two years.”
Moreover, the cryptocurrency has also formed a bullish divergence on the three-day time frame, “exactly like what was seen before the big bottom” at the beginning of the second quarter, the market observer added.
To him, this suggests that Solana may soon bottom out and begin a recovery to the highs of the macro range. However, another market participant asserted that “context matters here,” even though higher-level retesting is likely.
Analyst Crypto Scientist highlighted that SOL price is currently at the low end of a multi-year range, marking the first retest of this area after being removed from the range high.
“Some would argue that SOL has been distributive for nearly two years now, and that makes sense,” he explained, “[but]it rarely breaks the low of the range on the first try.” Furthermore, Scient noted that there is significant liquidity remaining between the $175 and $190 levels, which “should be tagged at some point in a broader bearish environment.”
As a result, analysts think it makes “much more sense to move up to clean up liquidity before the decline becomes more severe.”
Is December about to decide the fate of SOL?
Analysts Recto Capital asserted that the $123 horizontal support remains the “critical level” that Solana must maintain to prevent a significant drop to multi-year lows.
He elaborated that historically, bounces from this support have produced “outsized rallies” with moves of 140% and 100%. However, the rebound from this level has gradually weakened over time, with the recent rebound being only an increase of 15%.
This is important to consider as it indicates a “sharp deceleration in upside reactivity at this level” and rebound magnitude compression could impact SOL’s monthly closing price.
Our analysis shows that if the monthly close is above macro support, Solana will maintain a weaker uptrend, but if it closes below $123, the structure will change significantly.
The second case suggests that distribution has already begun, and we will see “how much this support has weakened since the last meaningful rebound that resulted in a near-doubling move earlier this year.”
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Moreover, it will start reflecting SOL’s performance in early 2022. At the time, similar price movements preceded “macro easing movements during the early stages of the bear market, including the decisive collapse that occurred earlier in the year.”
Ultimately, the analyst cautioned that it remains to be seen whether altcoins can rebound above this important level to end December, or if a collapse will “accelerate circulation sooner or later.”
As of this writing, Solana is trading at $126, down 3.4% on a weekly basis.
Featured image from Unsplash.com, chart from TradingView.com
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