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Solana History Repeats? RSI Signal Hints at SOL Correction Ahead

Last Updated March 29, 2024 2:25 PM
Valdrin Tahiri
Last Updated March 29, 2024 2:25 PM

Key Takeaways

  • Solana’s weekly RSI gave a bearish signal for the first time since September 2021.
  • The SOL price reached a yearly high of $210 last week before falling slightly.
  • Will history repeat, causing a similar correction to that of September 2021?

Solana’s weekly RSI generated a bearish divergence two months before reaching its all-time high in 2021. It has done the same in the past four months, coinciding with the yearly high of March 18, 2024.

As the price retraces after the yearly high, anticipation builds to see if history will repeat for SOL, leading to another substantial price correction.

What is Solana’s Bearish Signal?

The Relative Strength Index (RSI) is a momentum indicator traders use to determine if the trend is bullish or bearish. Momentum movements normally follow price movements, but there are some exceptions to the rule.

During cycle tops, the price often makes new highs while the momentum readings do not. This is called a bearish divergence and suggests that momentum does not support the increase. It often leads to a bearish trend reversal. The opposite occurs during cycle bottoms.

Solana RSI Bearish Signal
SOL/USD Weekly Chart | Credit: TradingView

Between April and September 2021, the SOL price reached a new high while its weekly RSI did not. It was the first time this happened in SOL’s price history. After the divergence, SOL fell by 48% in two weeks. Then, it reached its all-time high of $267 after 63 days before beginning a 14-month correction.

The SOL  price created a similar bearish divergence between December 2023 and March 2024. It remains to be seen if a comparable correction will follow. If history repeats, the SOL price will fall to $110 before reaching a new all-time high by the end of May.

SOL Price Prediction: Has the Correction Started?

The wave count since the start of the year shows that SOL is in wave three of a five-wave upward movement (white). The sub-wave count is in black, showing a potentially completed five-wave increase. The yearly high was also made at the 2.61 external Fib retracement of the previous drop, aligning with the count.

The wave count reinforces the bearish signs from the weekly time frame. It specifies the price will begin wave four soon or has already done so, correcting toward the 0.382 Fib retracement support level.

Solana Price Wave Count
SOL/USDT 2-Day Chart | Credit: TradingView

Afterward, SOL can begin the fifth and final wave of its increase, taking it to a new all-time high price in the process. This bearish prediction will be rendered invalid with a movement above $210, meaning SOL is still in wave three and can increase toward a new all-time high.

Even though the SOL price recently reached a new yearly high, the weekly RSI and wave count both show signs of weakness. While this will likely not mark the end of the ongoing rally, SOL could be due for a significant correction before the upward trend resumes.

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