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Solana Price Recovers and Reclaims $150 – What Shape Will SOL Correction Follow?

Last Updated May 6, 2024 11:07 AM
Valdrin Tahiri
Last Updated May 6, 2024 11:07 AM
By Valdrin Tahiri
Verified by Peter Henn

Key Takeaways

  • The SOL price bounced on May 1, creating a double bottom pattern.
  • The bounce likely marked the end of the first portion of a corrective wave four.
  • Will the correction take the shape of a triangle, or will it be an A-B-C structure instead?

After a significant drop ongoing since March 17, the SOL price created a double bottom on April 13 and May 1. The double bottom is a bullish pattern that often leads to a bullish trend reversal.

The bounce suggests that the SOL price has reached its temporary bottom. However, considering the duration of the previous upward movement, the correction is probably not over yet.

SOL Price Bounces – Confirms Temporary Bottom

The SOL price has increased since May 1 and is creating its fifth bullish candlestick in six days. Even though SOL did not break below its April 13 lows, it is likely that the bounce marked the end of the first portion of the correction. This is because of the strong reaction and bullish divergences in both the RSI and MACD.

Measuring from March 18, SOL has likely completed wave A (black). If this is an A-B-C correction, SOL will likely get rejected between the 0.618-0.786 Fib retracement resistance level, marking the end of the B wave.

A-B-C Wave Count
SOL/USDT Daily Chart | Credit: TradingView

Then, another downward movement could follow, completing the C wave. This is the first possible outline for how the correction will go.

The second one suggests the local bottom is in, though more consolidation is expected until the price eventually breaks out. In this alternative, SOL is in a fourth wave triangle. While the rejection that marks the top of wave B will be similar, the ensuing movement will differ.

Rather than falling to a lower low, SOL will consolidate inside a symmetrical triangle before an eventual breakout. An important difference is that the April 13 and May 1 lows will hold in the triangle scenario.

Triangle Wave Count SOL
SOL/USDT Daily Chart | Credit: TradingView

The ongoing bounce confirms that SOL has completed the A wave of its correction. The reaction once the price approaches $175-190 will confirm if the correction is an A-B-C structure or an A-B-C-D-E triangle.

Solana Price Correction Reaches 40% but Bullish Divergences Point to SOL Recovery

On April 30, Solana broke down from an ascending support trend line existing for nearly 100 days. Then, it bounced at a long-term horizontal support area on May 1, possibly creating a long lower wick. There are bullish divergences developing in multiple time frames, aligning with a double bottom pattern from the price action.

Can these divergences lead to a price bounce, marking an end to the 44-day Solana correction, or will SOL break down, plunging toward the next support level?

Solana Breaks Down but Bounces

The SOL price has fallen since its yearly high of $210 in March. The price created a lower high on April 11 and accelerated its rate of decrease afterward, culminating with a low of $119.64 13 days later. After a seven-day bounce, SOL  fell again and reached a new low of $118.93 on May 1. SOL then bounced once more and trades at $124, in the process of creating a long lower wick.

SOL Price Upward Movement
SOL/USDT Daily Chart | Credit: TradingView

While SOL broke down from a 98-day ascending support trend line, the price still trades above the $122 horizontal support area, which has existed since March.

Also, the daily RSI and MACD are both generating bullish divergences, signs often associated with bottoms.  So, while the price action is undetermined, indicator readings both suggest a bounce is forthcoming.

Short-Term Bounce Incoming?

The decrease since the aforementioned high resembles a five-wave downward movement (black). Similarly to the daily time frame, the six-hour RSI and MACD have already confirmed their bullish divergences. When combined with the price action, which has created a double bottom pattern, a significant bounce is expected.

SOL Price Completes First Part of Correction
SOL/USDT Daily Chart | Credit: TradingView

If the bounce occurs, the main resistance area will be between $165 and $176, created by the 0.5-0.618 Fibonacci retracement resistance area. The are also coincides with a descending resistance trend line existing since the yearly high.

However, due to the length of the preceding SOL upward movement, it is likely the current correction is only the first part of a larger correction.

SOL Price Prediction: What’s in Store for May?

The price movement since March is indicative of a corrective wave four (white) in response to a 282-day upward movement part of wave three. Because of the length of the upward movement, the correction is expected to be length as well.

In the first count, wave four will take the shape of a symmetrical triangle, the most common one in such patterns. The previously outlined short-term five-wave decrease was part of sub-wave A. In this count, SOL will soon bounce, beginning sub-wave B. This aligns with the bullish divergences in the RSI and MACD.

SOL Price Triangle Wave Count
SOL/USDT Daily Chart | Credit: TradingView

The second count is more bearish. While it also suggests the price will bounce and complete wave B, the wave four correction will be an A-B-C structure instead of a triangle. In this scenario, SOL will fall during the summer, completing wave four near the $90 horizontal and 0.618 Fibonacci support level.

Bearish Wave Count
SOL/USDT Daily Chart | Credit: TradingView

Both counts suggest a significant bounce is likely before another downward or sideways movement that completes wave four. The reaction to the $165-$175 resistance will be key in shaping the type of correction ahead.

Solana’s Correction Is Not Over Yet

After a meteoric rise since the start of 2023, it seems that the Solana upward movement has finally ended. Over the past 44 days, SOL is mired in a corrective structure that it likely to resume in the near future. A short-term bounce is likely to happen because of the multiple bullish divergences in different time frames. Afterward, the correction could lead to either another downward movement or sideways consolidation instead.

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