The price of Solana (SOL) has risen an impressive 60% since the new year, partly driven by the hype surrounding memetic cryptocurrency BONK. However, the SOL/USD pair is currently showing signs of exhaustion, raising hopes that the token may make a short-term correction in the coming days.
solana is overbought
Solana is one of the best performing cryptocurrencies to date in 2023 after its biggest loss in 2022.
SOL price jumped to $19.50 on Jan. 9 and rose nearly 120% in a recovery rally after falling below $8 on Dec. 29, 2022.
However, the price surge has also turned Solana into an overbought asset, according to the daily Relative Strength Index (RSI) above 70, as shown below.
Traditional investors usually see an overbought RSI as a potential sell signal. This is given that the indicator has historically coincided with buyer exhaustion periods. As a result, the SOL price may enter a consolidation or flattening phase, with the RSI falling below 70.
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If that happens, the next downside target for the Solana token will appear around the 50-day exponential moving average (50-day EMA, red wave) near $14.50.
On the other hand, a prolonged sell could see the price land at the 20-day EMA (green wave) near $13.35, or a 20% correction.
Buy SOL price drop?
However, on the longer timeframe chart, SOL is eyeing a decisive breakout above the general resistance level around $17.50.
The $17.50 level helped contain SOL’s attempt to move down in the April-July 2021 session. Therefore, a successful reversal of the resistance level to the support could prompt the trader to open new bullish positions towards his $25. This is the level that coincides with SOL’s downtrendline resistance (black).
Conversely, if the $17.50 resistance level fails to reverse, the SOL risks falling below $8. possibility Considering the negative fundamentals surrounding the Solana ecosystem.
This article does not contain investment advice or recommendations. All investment and trading moves involve risk and readers should conduct their own research when making decisions.