Why SOL could fall by 9%

• Solana price is facing rejection around the previously broken uptrend line, suggesting a downtrend.
• On-chain data adds credence to a bearish outlook on the long-to-short duration of SOL is below one, declining development activity.
• A daily close of the candle above $141.43 would invalidate the bearish thesis.

Solana (SOL) suggests a downtrend as it trades around $132 on Tuesday following a rejection from the upline previously broken at $139.80 last week. The bearish outlook is further supported by declining development activity and a long-short ratio below one.

Solana price shows signs of weakness

Solana retested but was rejected from the previously broken uptrend line around $139.80 (drawn by connecting several late January lows) on Friday. It fell 5.3% over the next two days. At the time of writing on Tuesday, it is trading at $131.91.

If this trendline and 50-day EMA at $141.43 continue to hold as resistance, SOL could extend the 9% decline to daily support around $120.91.

This bearish thesis is further supported by the Relative Strength Index (RSI) and the Awesome Oscillator (AO) on the daily chart, which are trading below their neutral levels of 50 and zero, respectively. Both momentum indicators suggest bears are gaining momentum and point to a downtrend.

SOL/USDT Daily Chart

Coinglass data further supports Solana’s bearish outlook. SOL’s long-short ratio is 0.88 and has dipped below one since Friday. This means that more traders are betting on the price of the asset to fall.

Long-short SOL ratio graph

Moreover, Santiment’s Development Activity Index aligns with the bearish picture. This metric shows the project’s development activity over time based on several purely development-related events in the project’s public GitHub repository.

In the case of SOL, the index drops sharply from 176.95 on Sunday to 166 on Tuesday. This trend has been declining since the beginning of September. This suggests that the low level of development activity on Solana reflects declining confidence in its blockchain projects, which in turn undermines investor confidence and reinforces negative market sentiment.

Diagram of SOL development activity

Despite the bearish outlook suggested by technical analysis and chain measurements, if Solana’s daily candlestick closes above $141.43, the 50-day EMA would invalidate the bearish thesis by forming a higher high on the daily time frame. Such a move would push SOL up 5% to hold its August 28 high of $149.30