Solana Tests Critical Support at $137 as Momentum Resets From December Extremes
Market Structure Shifts Lower
- SOL dropped by 29.4% in the past week, wiping out November’s increase in a brutal reversal.
- Momentum oscillators reset from extremely overbought levels, indicating that relief rallies could occur.
- Solid demand zones are established between $137 and $123, levels that saw strong demand in earlier downtrends.
The extent of downside momentum heading into this weekend could hinge on macro catalysts, specifically U.S. economic data rallying bond yields and the U.S. dollar or downside follow-through proving a destabilizing spark in the defi cross-chain rally. Key Solana-based projects that ostensibly leverage Solana’s advantages – Serum, Mango and Raydium among them – were the most liquid and reliable bridge assets before the hack, mirroring the cross-chain trends in Olympus, Rari, and Gnosis. This close correlation suggests Solana can still be dragged around by other markets, but whether it’s as a source of funds for deleveraging-liquidity selling or as a continuing proxy for defi risk sentiment is worth a trade.
| Metric | Value |
|---|---|
| Asset | SOLANA (SOL) |
| Current Price | $136.91 |
| Weekly Performance | 6.35% |
| Monthly Performance | -29.43% |
| RSI (Relative Strength Index) | 40.1 |
| ADX (Average Directional Index) | 43.7 |
| MACD (MACD Level) | -8.68 |
| CCI (Commodity Channel Index, 20-period) | -34.31 |
RSI Drops to 40 – First Touch of Oversold Territory Since August
With that in mind, patient bulls may choose to allow the RSI to bottom towards 30 as it historically has in four of the previous six pullbacks prior to returning to SOL. Such a scenario would likely coincide with the 200-DMA trending flat or turning lower over the next week or so, which may also strengthen support. If this failure to mention in a blog by SBF is a turning point, oscillators in a housekeeping adjustment for the first time in nearly two weeks.
One especially revealing metric is how the weekly RSI is still relatively high at 48.73, despite the fact that the daily RSI indicates overselling, which means that the longer-term uptrend structure still hasn’t completely fallen apart. Therefore, for swing traders looking for oversold bounces, this timeframe divergence creates an interesting dynamic – the daily graph is in full capitulation mode, but the weekly graph is in full-on bearish mode, giving a greater than 50% chance that something is going to break to the upside. Identical multi-timeframe divergences existed in September and November, with 20-30% relief rallies in the context of the broader uptrend.
ADX at 43.7 Signals Mature Downtrend Nearing Exhaustion Point
The selloff could certainly persist if bearish macro headlines keep punching the tape. While other cyclical plays like banks and semis can still go lower, energy firms hit very hard already, with reversion risks rising amid softness in some key commodities. On the risk axis, defensives have excessively re-rated lower, but among growth, I like tech’s setup best as it could benefit from long-duration bond yields retreating. My ultimate stress test for this correction is holding real rate derivatives like gold or TIPS.
Since ADX tells us nothing about the direction of the trend, an elevated reading merely affirms what we see from current prices — the sellers have dominated since the Upbit news hit. In general, when ADX is this high, strategies meant for sideways conditions (like range trading) won’t perform as well as strategies meant for trending conditions (like trend following). So, for now, day traders will want to alter their usual approach and hold off on using trends to determine the bias. This means no more buying dips until ADX collapses back below 30. For now, it’s safe to assume the downtrend will likely continue (or even strengthen) until proven otherwise.
50-Day EMA at $150 Transforms From Support to Resistance Ceiling
The break now flips this region into resistance, and further recognizing the importance of the 50-day EMA, price has not posted a daily close beneath this level since reaching escape velocity from the gravitational pull of the benchmark moving average in early November. Buying interest has re-emerged from the mid-$130s to around the 100-day SMA, currently $126, with a real lack of technical support between the two levels mentioned aside from an unfavorable low-$80 range from September.
If the 200-day EMA fails to bolster price, the next viable support level resides around $100 and conflates with the 61.8% Fibonacci retracement of the entire rally from the January 22 low to the all-time high. Avoidance of that retracement may signal waning downside momentum but cautious bulls need to see that the 50-day EMA holds as support in the event of it being tested. The 38.2% level near $86 must preemptively keep price from extending losses and this rebound should be capped beneath the 50-day EMA if the breakdown is to remain valid.
Resistance Stacks Heavy Between $146 and $159 After Technical Breakdown
Above where the price has been oscillating for the past two weeks, at the 50-day exponential moving average and 20-day EMA levels for the past two weeks, the pigmented $150.00 level has been a prominent resistance area. This is followed by the $100.00 EMA over the 50-day EMA and the $159- level over $100.00 as the $100.00 EMA over the 50-day EMA. near-term EMAs. There are also the monthly middle band at $200.00.00.38 per the Fibonacci retracement that comes in at $193.50.
Bulls will defend a support level that is more conducive to upside continuation despite the recent turbulence, and there are multiple technical factors that converge in the $131-137 zone. The monthly S1 pivot at $131.11 mashes up rather solidly with horizontal support from October’s consolidation range, while the $137 zone has seen bounces on three separate instances over the past quarter. Most critically, the 200-day EMA comes in near $123 as the final defensive line, a level that hasn’t been put to the test since the summer correction and which would likely attract institutional buying interest given Solana’s app revenue that now exceeds that of Ethereum on a daily basis.
The market structure tells an interesting story of short-term technicals divorcing from fundamental momentum. The Upbit event caused real technical damage, yet Solana’s fundamentals continued to strengthen – the network now sees more daily app revenue than Ethereum while trading at a fraction of its market cap. When price action divorces from underlying progress, patient buyers tend to have a good edge, especially when technicals become very oversold due to news-based selling versus any real weakness.
Bulls Must Reclaim $146 to Shift Momentum From Defense to Offense
To the downside, Solana price is at risk of an immediate drop to the $120 support level upon a daily close below the 200-day EMA. If this prop fails, further selling could extend to the $100 psychological level where long-term investors may show demand. Traders should also monitor the confluence with the 200-day SMA for possible oversold conditions in this eventuality.
If bearish continuation is the play, fade failed bounces to $131 and wait for price to retest it as resistance. If it holds, odds favor a slow grind lower towards $123 which bulls would defend with ferocity. Bitcoin dominance, Poly Network hack, and escalating regulators are tailwinds for bears. Way more fun to watch it live than playing Monday morning quarterback; how this interacts with our deployment and levels will determine whether we wait for $100-110 or tap out the high timeframe bottom.
Based on the current momentum exhaustion readings and the 200-day EMA still a good 30% below the price, it is likely that SOL will consolidate somewhere in this region and establish a trading range between $131-146 over the next week as it digests this week’s volatility. Daily RSI is already reaching oversold levels, the current ADX is at an extreme, and the coin is sitting just above daily cloud support, which are all conditions more conducive to mean reversion than continued waterfall capitulation, at least in the short term. Any oversold bounces are likely to face considerable resistance until bears prove that they can close daily candles back above $137 to set a new local lower-high.
