The price of Solana (SOL) is about to plummet by up to 95%, and here’s why

The SOL price increased by 75% over the last two months, but technical analysis reveals that this could just be a sophisticated bull trap.

Two months after bottoming out locally about $25.75, the price of Solana (SOL) rebounded by almost 75%, but the token’s impressive upward movement is in danger of being completely undone because of a concerning bearish technical signal.

There is a significant SOL crash setup.

A “head-and-shoulders (H&S)” pattern, so named because it develops when the price makes three successive peaks over a common resistance level (called the neckline). It is noteworthy that the head, which is the central peak, ends up being taller than the other two shoulders, which are about equal in height.

When the price breaks below the neckline of a head and shoulders pattern, they get resolved. According to a technical analysis rule, as measured from the breakdown point, the price declines by an amount equal to the distance between the head’s peak and the neckline.

On its longer-timeframe charts, it looks that SOL has been forming a similar bearish pattern.

The token has been building the right shoulder of the overall pattern on the weekly chart, indicating a pullback in the direction of the neckline at $27 during the second half of 2022. A drop below $27, though, might trigger a prolonged decline below $2.80.

Alternatively put, a 95% price decrease by the end of 2022 or the beginning of 2023, a situation also predicted by analyst “PROFIT BLUE.”

A bear market rally, perhaps?

The highly unsettling bearish setup at Solana is visible since it closely follows market movements in risk-on environments, which are mostly being pushed by the Federal Reserve’s hawkish reaction to inflationary pressures.

For instance, SOL finished the week of August 14 with a 10.5% profit, matching the performance of both the S&P 500 index and Bitcoin (BTC). These markets responded to a U.S. consumer price index (CPI) reading that was lower than expected, which increased the likelihood that the Fed will pause in increasing interest rates.

However, several experts have issued cautionary statements over these continuous price increases in the hazardous areas of the market, citing examples of such bear market bounces in the past. As a result, if SOL’s correlation with riskier assets continues positive, its 75% comeback risks being a fakeout.

Fundamentally speaking, Solana suffers significant FUD because of its ongoing network problems and alleged centralization. To address these problems, the project’s supporters have included additional enhancements.

Even then, market analyst IncomeSharks claims that a 95% price drop is too “wild,” as it would indicate that Solana is a project that would pull rugs out from under investors similar to Terra.

SOL may look for rebound chances at a multi-year ascending support trendline, as seen below, during the subsequent significant decline.

In other words, SOL’s negative continuance may continue until the stock’s price falls to $20, or more than 55%, from its current level.

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