Solana (SOL) broke above a critical resistance level that limited its recovery efforts several times during the November 2021-March 2022 price correction, thus raising hopes of further upside in April.
Solana flips major resistance to support
In short, the SOL price has gone through a lot of volatility in recent history when it tests its multi-month downward trend.
For example, the SOL/USD pair fell by 60% in December 2021, two months after it bounced back from the above resistance. Similarly, it lost over 40% in November 2021 in a similar retracement move led by a selloff near the trendline.
But after Solana broke it on March 30th, the resistance trendline flipped as support (S/R flip), accompanied by an increase in trading volume, indicating traders’ confidence in the breakout move. In doing so, SOL price rose 25% to $135, bringing the psychological resistance of $150 within reach.
Why is SOL (Technically) Bullish?
From a technical perspective, the SOL’s breakout moved above its declining trendline resistance, coinciding with a bullish crossover between its two major moving averages: the 20-day exponential moving average (20-day EMA; green wave) and the 50-day EMA. -day EMA (red wave).
Dubbed the golden cross, the technical indicator occurs when an asset’s short-term moving average jumps above its long-term moving average. Traditional analysts consider this crossover to be a buy signal.
For example, the 20-50 EMA crossover in August 2020 may have helped propel the price of SOL by over 650% to above $267, among other fundamental and technical catalysts. As such, the golden cross increases the chances of the SOL continuing its rally, as well as its breakout above a falling trendline resistance.
RSI divergence
If the technical fractals highlighted by Delphi Digital are to be believed, the above possibilities increase further.
The crypto research firm highlighted a correlation between the price of the SOL and its combination of two technical indicators: the S/R flip and the Relative Strength Index (RSI) divergence.
Notably, the first time Solana’s RSI jumped above 70, an “overbought” area, after a strong price uptrend – which was also broken by the descending trendline support of that period – the SOL turned the RSI lower or consolidated sideways. Despite this, he continued to rally.
For example, the SOL rose 378% after the RSI broke above 70 for the first time in August 2021. Similarly, an overbought RSI period during May-June 2021 also coincides with Solana’s 268% uptrend. Delphi Digital suggested that fractals appeared in the same way that SOL has been performing recently.
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Therefore, SOL/USD may continue its uptrend while using the drawn Fibonacci retracement levels between the $261-swing high to the $77.50-swing low, suggesting $147-$150 as interim upside targets.
Conversely, a pullback at or before testing the $147-$150 price range could result in SOL withdrawing to $120 as its interim support, with a possible slide towards the 20- and 50-day EMAs.
The views and opinions expressed here are solely those of the author and do not necessarily reflect the views of Cointelegraph.com. Every investment and trading move involves risk, so you should do your own research when making a decision.
