SOL under bearish scrutiny: Fibonacci levels hold key to success

Solana (SOL) continues to experience strong bearish pressure, shedding 16.78% from its local high of $264.36, with its prices currently hovering near the critical support level of $225. The cryptocurrency is stuck in a downward channel marked by a sustained downtrend, as evidenced by the trend line in the chart below.

This trend line stopped the price from rising and kept SOL under selling pressure. The current battle involves a battle between buyers and sellers, with $225 becoming an area of ​​immediate demand.

Source: TradingView

Historically, this level has served as strong support, but if it breaks, SOL could go further down to $215.77, the 23.6% Fibonacci retracement level.

Key technical levels and indicators SOL

The Fibonacci retracement tool shows critical levels that determine the price behavior of a coin. For example, the 38.2% retracement level at $225.05 closely coincides with the current support zone, making it a crucial area to hold. On the upside, the 50% retracement level at $232.56 coincides with key resistance levels, including the 20, 50, 100 and 200 period EMAs.

SOL is currently trading below all of these EMAs, adding to the bearish outlook. Moreover, the Relative Strength Index is at 36.06, signaling that SOL is approaching oversold conditions. While this suggests the bearish momentum may be excessive, it also leaves room for further declines if selling pressure continues.

However, the 200-day EMA at $219 is another important support level to watch in case the $225 level fails. A break below this area could trigger a rapid decline to $215.77 and below, with the descending trendline continuing to contain upward movement.

Buyers can use this as an opportunity to recover. They may try to break above $232 and reach the $235 resistance zone. A fair value gap exists above the current price, around $235, which could help prices recover if bulls regain momentum.

SOL derivatives market reflects fading bullish momentum

Solana’s open interest (OI)-weighted funding rate rose sharply in late November, peaking at 0.06%, reflecting strong bullish sentiment as traders expected further gains, according to CoinGlass data.

However, as SOL’s price fell from its high of $264, funding rates fell to neutral, signaling waning optimism among leveraged traders. Additionally, $15.37 million worth of SOL cryptocurrency was completely liquidated, highlighting the increased volatility.

Of that, $14.47 million came from the liquidation of long positions, meaning losses for overleveraged bullish traders who failed to anticipate the downtrend. In comparison, short liquidation was $908,030, demonstrating the current dominance of bearish momentum in the market.