At least two technical indicators suggest that Solana (SOL) may experience a sharp price recovery in June, even after the SOL/USD pair lost 78.5% year-to-date.
SOL price nears a bullish wedge breakout
First, Solana has been drawing a “falling wedge” since May, as evidenced by its movement within two descending, converging trend lines. Traditional analysts view falling wedges as bullish reversal patterns, meaning they resolve after price breaks out of its uptrend line.
As a rule of technical analysis, the profit target of a falling wedge is measured after adding the maximum distance between its upper and lower trendlines to the breakout point. Therefore, based on the breakout level of SOL, its price will increase by about $20, as shown below.
That puts SOL’s price target at $58, or about 35% higher, at current prices. But if price pulls back after testing the upper trendline of the wedge and continues to move within its range, SOL’s profit target will continue to decrease.
Solana coin can rise to at least $44 after breaking out of its wedge pattern.
More upside clues for Solana come from the growing separation between its price and momentum trends.
In detail, SOL’s recent downtrend has been accompanied by an upside retracement in its daily relative price index (RSI) readings, a measure of overbought (>70) and oversold (
This condition, also known as a “bullish divergence,” shows that the bears are losing control and that the bulls will take over the market once again.
Solana still faces bearish risks
Financial markets veteran Tom Bulkowski believes a falling wedge is not a bullish indicator, but has a higher breakeven failure rate of 26%. Meanwhile, the falling wedge has only a 64% chance of hitting its profit target, making it possible for Solana to continue its downtrend.
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“The only change that works is a downside breakout in a bear market.”
Solana’s fundamentals agree with the downside outlook. These include the negative impact of a hawkish Federal Reserve and its tightening on risk assets, including cryptocurrencies and stocks.
As such, SOL could move lower on the aforementioned macro risks, with its next potential downside target in the $19-25 area, as shown below.
The range acted as support during the March 2021-July 2021 trading session.
The views and opinions expressed here are those of the author and do not necessarily reflect the views of Cointelegraph.com. Every investment and trading move involves risk and you should do your own research when making a decision.