Solana Surges 12% But Faces Bearish Divergence

Solana has experienced a 12% surge over the past week, aligning with the broader market's recovery efforts. At the time of reporting, the Layer-1 (L1) cryptocurrency is trading at $139.41. However, a critical technical indicator has signaled a bearish divergence, casting doubt on the sustainability of this upward trend.

An examination of the SOL/USD one-day chart reveals that while the price of Solana has increased over the past seven days, its Chaikin Money Flow (CMF) has decreased, creating a bearish divergence. The CMF indicator assesses the strength of buying and selling pressure by analyzing volume and price movements over a specific period. It ranges from -1 to +1, with positive values indicating strong buying pressure and negative values signaling selling dominance.

A bearish divergence occurs when the price of an asset is rising, but the CMF is falling, suggesting that the rally lacks strong buying support. This implies that despite Solana's higher prices, capital inflows are weakening, hinting at a potential reversal or slowdown in the coin’s uptrend.

Solana’s long/short ratio further supports this bearish outlook. At the time of reporting, it stands at 0.97, indicating a high demand for short positions among derivatives traders. The long/short ratio measures the proportion of long positions (bets on price increases) to short positions (bets on price declines) in the market. A ratio below one means there are more short positions than long ones, indicating that traders are bearish on Solana and are betting in favor of short-term price dips.

As of the latest update, Solana is trading at $139.41, resting above support formed at $136.92. Once buying pressure wanes and Solana sellers consolidate their dominance, the coin’s price could attempt to test this support level. Should the price zone fail to hold, downward pressure on Solana would intensify, potentially driving its price down to $130.82. Conversely, a resurgence in actual demand for Solana would invalidate this bearish outlook. In that case, the coin’s price could rise to $152.87.