Solana Struggles to Hold Gains as Recent Drop Points to a Possible Correction
SOL price makes a small recovery from recent low but this could be the part of a larger correction.
Key Takeaways
- Wave (iii) peak is likely near the $264 resistance zone.
- Correction targets key support levels at $209–$176.
- The larger bullish structure remains intact above $193.
Solana (SOL) has shown remarkable strength from its 2024 lows, reaching a new all-time high. The price recently surged from $120 to $260 after breaking out of a descending triangle.
This bullish momentum aligns with an anticipated five-wave Elliott Wave pattern, with SOL potentially completing wave (iii).
However, as the Relative Strength Index (RSI) nears overbought territory, traders are now questioning whether the current rally will extend further or if a wave (iv) correction is on the horizon.
SOL Price Analysis
The daily chart for Solana (SOL) shows a strong recovery from its prior lows, following a clear breakout above a descending triangle that had been in play for much of 2024.
The breakout was accompanied by significant bullish momentum, driving the price from the $120 region to the current high of around $260 on Nov. 22. This is the region of the previous cycle’s all-time high and is effectively a new one by 1.90%.
This move aligns with an excepted five-wave pattern, with the price currently in wave (iii) of a larger impulsive sequence. Wave (iii) is historically the strongest and most extended wave in an Elliott Wave cycle, evidenced by the rapid ascent observed here.
Key Fibonacci retracement levels are providing critical insights into the current trend. The price has surpassed the 0.382 retracement at $209 and is now consolidating above this level.
The 0.236 level at $230 is immediate support, while $264 remains a key resistance level, marking a potential wave (iii) peak.
The RSI is trending toward overbought levels, which may indicate that a wave (iv) corrective phase is approaching. Potential retracement targets are around $176 (0.618 Fibonacci retracement level).
From a broader perspective, SOL’s breakout above the $173–$176 resistance zone (now turned support) is a significant development, reversing the prior bearish trend. However, caution is advised as the current wave progresses, with short-term corrections likely before wave (v) targets higher levels.
Key Observations
- Strong Wave (iii) Momentum: SOL is in a powerful wave (iii) phase, with the price surging from $120 to $240, signaling strong bullish momentum.
- Key Fibonacci Levels: The 0.236 ($230) and 0.382 ($209) retracement levels act as immediate support and consolidation zones, while $264 is the next major resistance.
- Potential Wave (iv) Correction: RSI is nearing overbought levels, suggesting a short-term retracement toward the $176–$173 support zone before wave (v) continuation.
SOL Price Analysis
The 1-hour chart for Solana suggests that wave (iii) of the current Elliott Wave structure has likely reached its peak near $264. This is followed by the initial stages of a wave (iv) correction.
The price is forming an ABC correction pattern, with wave (a) already completed at a low of $224 on Nov. 26 and wave (b) in progress. The corrective nature of this movement implies that SOL could test lower support levels before resuming its upward momentum in wave (v).
Key Fibonacci retracement levels provide important zones to monitor during this correction. The 0.382 retracements at $209 and the 0.5 level at $193 are critical levels that may support wave (iv).
Additionally, the 0.618 retracement near $176 aligns with previous horizontal support and could serve as the bottom for this corrective wave. The point below this bullish possibility will be invalidated.
From a structural perspective, the breakout above $230 (0.236 retracement of the current move) remains intact as long as price action holds above $193.
Therefore, this consolidation phase is healthy for the larger bullish structure and offers opportunities for accumulation before a potential continuation higher in wave (v).
Key Levels to Watch
- Resistance at $264: The peak of wave (iii) serves as the next key breakout point for continuing the bullish trend in wave (v).
- Support at $209–$193: These Fibonacci levels are critical during the wave (iv) correction and could provide strong bounce zones for the next move up.
- Deeper Support at $176: The 0.618 retracement aligns with prior structural support and could be the final correction low if $193 is breached.
