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 and form 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.
SOL/USD weekly price chart featuring ‘megaphone’ breakout scenario. Source: TradingView
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.
SOL/USD weekly price chart featuring 50-week EMA and rising trendline support. Source: TradingView
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.
SOL/USD weekly price chart featuring bear flag/rising wedge scenario. Source: TradingView
The rising wedge’s downside target appears to be near $60 after measuring the maximum distance between its upper and lower trendline (about $40) and subtracting it from the potential breakout point near $100.
Meanwhile, the bear flag’s downside target is near $30 after calculating the height of its previous uptrend (about $60) and subtracting it from the potential breakout point near $90.
Source: Cointelegraph
