Solana in Discount Zone Near $124: Is a Recovery Brewing or Another Drop?

Solana traded near $124.12 on January 26, posting a daily gain of around 4.5%, but the move failed to change the wider bearish structure visible on the daily chart. According to TradingView data, SOL/USD is still in a downtrend, remaining below all the major exponential moving averages.

This indicates that sellers are in control of the larger market trend, despite that buyers attempted to steady the price earlier this month.

The current price action occurs as the entire crypto market remains cautious, with traders waiting to see if Solana and other major altcoins can maintain their current support levels or continue to fall into a correction.

Solana Faces Heavy Resistance After January Bounce

On the daily chart, Solana is below the 20, 50, 100, and 200 EMA levels, which are grouped closely between $131 and $157. This strong resistance area has been preventing prices from moving up in January. Every attempt to reach this area has been met with selling pressure and has not been able to move up.

Bollinger Bands also support this analysis. SOL is in the lower part of the band, with the middle band at $135, which is close to the 20- and 50-day EMAs.

Source: Tradingview

After a strong fall in November and December, Solana made a short-term bottom and attempted to move up, but the recent price action indicates lower momentum. 

Failure to remain above the significant averages indicates that the upmove is only a correction and not a genuine reversal.

Also Read: Solana Approaches Key Neckline at $127, Next Trend Hinges on Breakout

Momentum Signals Point to Fading Buyer Strength

Momentum indicators remain bearish. The Relative Strength Index is about 40.8, which is below the middle level of 50. In the first week of January, the RSI was improving, but the current decline indicates that the buying momentum is not gaining strength.

The MACD is also indicating a bearish trend. The MACD line is below the signal line, and the histogram is red. This indicates that the bearish momentum is still strong, even if the prices are rising in the short term.

Source: Tradingview

If Solana fails to reclaim the $131-$135 level, the price may fall back to the lower demand zone. The key level of support is around $118.50, and then the larger demand zone is between $115 and $120, where the price has touched a few times.

Valuation Metrics Hint at Early Accumulation Phase

In addition to these technical factors, the longer-term valuation information reveals that Solana is currently trading below its average.

On January 26, James observed that SOL is making negative Z-score values of around -1.28 on valuation charts that measure the deviation of prices from their long-term averages. In the past, such factors have appeared during long bear markets, not at the end of a bull market.

Source: X

Castillo Trading also observed that there are similarities between the current market trends and previous market trends in which the target for the downside was obvious but was halted by early signs of accumulation.

Source: X

Also Read: Solana Holds Near $127, but Analysts Warn of Breakdown Risk