Solana is in danger of slipping to $60 after forming a bull trap

Solana (SOL)’s recovery move this weekend dried up midway as the price fell below the $85 region from the $96 high on Feb. 21. On-chain indicators on SOL show the market establishing a bearish reversal pattern.

Solana threatens to fall to $60

Solana, which recently formed a technical structure resembling a head and shoulders (H&S) pattern, is in danger of pushing the price to $60, down almost 30%.

An H&S pattern occurs when price makes three consecutive highs above a common support level (known as the neckline). The center peak of the pattern, called the “head,” is longer than the other two peaks, called the left shoulder and right shoulder, which are of similar height.

The H&S pattern tends to drive prices lower, with downside momentum equaling the maximum distance between the head and the neckline.

SOL establishes H&S pattern on daily chart | Source: TradingView

The downside target of the H&S pattern is near the $60 region, which also provides support in August 2021, just before Solana price surges to a record high above $250.

Bearish flags increase downside risk

The risk of Solana suffering another major sell-off is also increasing as a “bearish flag” technical pattern has formed.

Notably, SOL’s price broke out of the bearish pattern. However, there is now a risk of a return to the previous downtrend, also known as the “flagship” area, calculated from the breakout point as shown in the chart below.

SOL is establishing a bearish flag pattern on the daily chart | Source: TradingView

Therefore, the SOL bear flag has a risk of pushing the price into the $60 region or below, similar to the H&S pattern.

Also, Solana’s disappointing performance over an extended period has caused investors to lose confidence in the asset.

The SOL Social Sentiment Index has been completely negative for more than three months. Only in late January and early February did the index briefly touch positive territory.

Investor Sentiment Solana | Source: Santiment

Market cap is down 62% from $77 billion in November to $26 billion today. This dropped Solana to 8th place on the market cap chart. This is also one of the reasons why some investors are losing confidence in this altcoin.

Currently, SOL does not look very attractive as the risk-adjusted yield is -2.58.

Solana risk-adjusted returns | Source: Messari

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