Solana (SOL) risks crashing 35% in the coming days as it comes closer to painting a so-called “megaphone” pattern.
SOL price “megaphone” pattern
In detail, megaphone setups consist of a minimum of lower lows and two higher highs forming during a period of high market volatility. But, generally, these patterns consist of five consecutive swings, with the final one typically acting as a breakout signal.
SOL has been sketching a similar pattern since the beginning of 2022, with the coin undergoing a pullback after testing the megaphone‘s upper trendline near $140 as resistance — the fourth wing.
As a result of the pattern, the Solana token could extend its decline to test the megaphone‘s lower trendline as support near $65, about 35% below today‘s price.
Could SOL crash further?
If this scenario plays out, SOL could crash further after forming the fifth swing on its prevailing megaphone structure. While finding a perfect downside target in case of a breakout is tricky, traders typically select it by measuring the distance between the two trendlines from the point the lower one breaks and book profits when the price reaches 50-60% of that distance.
A bearish breakout risks putting SOL‘s price en route to nearly $40 in the coming weeks.
A pullback scenario
On the other hand, SOL’s bearish megaphone setup could fall short of achieving its breakout target as its price holds above a flurry of concrete support levels.
These levels include SOL’s 50-week exponential moving average (50-week EMA; the red wave) and an upward sloping trendline (the black line) that have served as accumulation zones for traders, as shown in the chart below.
As a result, an early pullback from 50-week EMA could invalidate the megaphone scenario.
Suppose the price falls below the 50-week EMA, only to seek a bounce from rising trendline support. In that case, it could confirm the presence of a “rising wedge” or “bear flag” setup in conjugation with the megaphone pattern’s upper trendline — again a bearish setup.
The rising wedge’s downside target appears to be near $60 after measuring the maximum distance between its upper and lower trendline of about $40 and subtracting it from the potential breakout point near $100.
Related: Profit taking and Bitcoin consolidation give bears an opportunity to take control
Meanwhile, the bear flag’s downside target is near $30 after calculating the height of its previous uptrend of about $60 and subtracting it from the potential breakout point near $90.
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, you should conduct your own research when making a decision.
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