Solana (SOL) is likely to drop to $70 if this pattern is confirmed

Solana (SOL) price could fall more than 45% to $70 if a head and shoulders pattern emerges on the intraday.

The chart below shows that SOL price rose to almost $217 in September 2021, fell to the support near $134 and then made a new all-time high (ATH) at $260 in September 2021. Earlier this week, SOL fell back to test the $134 support before a break of the 2022 low at $87.73.

Weekly frame of SOL/USD price chart setting a head and shoulders pattern | Source: TradingView

This price action appears to have formed a head and shoulders pattern, a bearish reversal pattern with three consecutive highs, with the middle high at around $257 (known as the head being about 200-200 feet higher than the other two highs on the right shoulder).

Meanwhile, SOL’s three highs are all holding at the $134 common support known as the “neckline.” A drop below signals a downtrend that extends to the length of the maximum distance between the head and the neckline.

In the case of SOL, the gap is around $137, which puts the head-and-shoulders price target near $170.

SOL trends so far

The bearish outlook comes as SOL’s price is down more than 22% this week and is currently around 55% below its ATH level, in line with other large-cap digital assets, including bitcoin and ether.

BTC/USD vs ETH/USD Weekly Frame Price Chart | Source: TradingView

The main cause of the ongoing decline in the crypto market was the decision to end the $120 billion-a-month asset purchase program, followed by three or more rate hikes throughout 2022 by the US Federal Reserve (Fed).

The central bank’s accommodative monetary policies helped lift the cryptocurrency’s market value from $128 billion since March 2020 to a peak of $3 trillion in November 2021. Meanwhile, evidence of cuts has capped investor exposure to crowded markets, including SOL, which has risen by almost 12,500% since March 2020.

Therefore, if the crypto market continues to decline in the coming sessions, the SOL is also at risk of validating a head-and-shoulders pattern setup.

Short-term outlook from SOL

While SOL’s longer time frame chart is tilted towards an extended bearish bias, its near-term outlook looks relatively bullish.

Daily frame of SOL/USD price chart | Source: TradingView

This is mainly due to two factors. First, SOL price fell to the critical $116 support, which was instrumental in limiting its downside attempt until September 2021. And second, the daily Relative Strength Index (Its RSI) fell below 30 – a classic buy signal.

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