Solana (SOL) dropped on May 26, continuing its decline from the previous day amid a broader retreat across the crypto market.
SOL price pennant breakdown underway
SOL price fell by over 13% to around $41.60, its lowest level in almost two weeks. Notably, the SOL/USD pair also broke out of what appears like a “bear pennant,” a classic technical pattern whose occurrences typically precede additional downside moves in a market.
In detail, bear pennants appear when the price trades inside a range defined by a falling trendline resistance and rising trendline support.
Bear pennant pattern. Source: ThinkMarkets
These patterns resolve after the price breaks below the lower trendline, accompanied by higher volumes. As a rule of technical analysis, traders decide the pennant’s profit target after adding the length of the prior’s leg lower (called “flagpole”) to the breakdown point.
SOL has been undergoing a similar breakdown after closing below its pennant’s lower trendline on May 25, as shown below. In theory, Solana’s profit target comes to be near $23, down about 45% from today’s price.
SOL/USD daily price chart featuring ‘bear pennant’ setup. Source: TradingView
Nonetheless, SOL’s bear pennant breakdown appears without a spike in trading volumes, suggesting that traders are not fully convinced with the move. That could prompt the token to retest the pennant’s lower trendline as resistance.
Moreover, a successful retaking of the trendline as support risks invalidating the bear pennant setup while bringing the 20-day exponential moving average (20-day EMA; the green wave) near $57.59 in proximity as the next upside target.
Conversely, a pullback could keep SOL’s near-$23 profit target in view, with $35.50-the May 12 price floor that preceded a sharp rebound-serving as interim support.
Solana price support confluence
SOL also trades near a support confluence, comprising multi-month horizontal and rising trendlines.
SOL/USD weekly price chart. Source: TradingView
The horizontal trendline near $45.75 served as resistance during the April-August 2021 session and later flipped to become support between January 2022 and March 2022. Simultaneously, the rising trendline has capping SOL’s extended bearish attempts since March 2021.
Related: Assuming Bitcoin plays nice, higher timeframe analysis points to $90 Solana (SOL) price
As the two trendlines converge, they could become a psychological entry point for investors with a long-term upside outlook. That would mean SOL rebounding towards its next upside target near $79, which also coincides with a multi-month falling trendline resistance.
On the other hand, a continued selloff in the Solana market would have SOL risk another massive decline, as discussed in the bear pennant setup above.
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