Why might SOL drop by 14%?

• Solana’s price failed to break above the 200-day EMA around $140.23, increasing the chances of a price decline in the future.
• On-chain data paints a bearish picture as SOL’s long-short ratio is below one, while a large investor is selling its holdings.
• A daily candle above $140.23 would invalidate the bearish thesis.

Solana (SOL) looks set to pare most of its recent gains if it fails to break above the 200-day exponential moving average (EMA) around $140.23, a key level that acted as resistance on Tuesday. This bearish thesis is also supported by the chain metrics which show that investors are anticipating price declines, a large wallet offloading their SOL holdings.

Solana price is in danger as it approaches key resistance

Solana’s price broke below the uptrend line (drawn by connecting multiple lows from late January) on Saturday and fell 6% over the next three days. On Tuesday, SOL price approached the key 200-day EMA but failed to break above it. The altcoin recovered 5% on Wednesday, but is falling again on Thursday.

This 200-day EMA at $140.23 roughly coincides with the broken uptrend line that previously acted as resistance and a 50% price retracement level at $136.77, making it a key resistance area.

If the 200-day EMA holds as resistance again, Solana’s price could drop 14% to the resting daily support level at $120.91.

The Relative Strength Index (RSI) and the Awesome Oscillator (AO) on the daily chart are trading below their neutral levels of 50 and zero, but still above oversold territory. Both indicators signal weak momentum and indicate the possibility of the bear trend continuing.

SOL/USDT Daily Chart

Chain values ​​also support another downside. According to Coinglass, Solana’s long-short ratio is also 0.89, under one. It is at its lowest level since August 11, which means more traders anticipate the asset’s price to fall.

Long-short SOL ratio chart

According to Lookonchain data, a whale or institution sold 695,000 SOL tokens worth $99.5 million this year. Since January 1, this wallet has sold an average of 19,306 SOL tokens worth $2.76 million per week. If this trend continues, the price of SOL could fall further as the movements of large investors tend to influence market sentiment around the coin.

Despite the bearish thesis signaled by both chain data and technical analysis, the outlook will change to bullish if SOL’s daily candlestick closes above $140.23, the 200-day EMA. This scenario could lead to a 6% rally to retest the August 28 high at $149.30.