Solana and Avalanche Look Ready to Retrace

Solana and Avalanche appear to have reached overbought territory, potentially leading to a significant correction. 

Solana and Avalanche Face Corrections

Solana and Avalanche look primed for brief corrections after getting rejected from crucial areas of resistance. 

SOL has surged by nearly 29% over the past week, rising from a low of $30.80 to a high of $39.70. The sudden upswing took SOL to test the 200-hour moving average on its six-hour chart. Although it attempted to slice through this resistance level multiple times, it did not show enough strength to produce a candlestick close above it. 

The lack of momentum at such an important hurdle seems to have led to a spike in profit-taking that has resulted in a 7.9% correction over the past few hours. The Tom DeMark (TD) Sequential indicator is currently presenting a sell signal, hinting at a steeper retracement. If Solana loses the $36.80 level as support, a downswing toward the 50-hour moving average at $35 or even $33.40 is possible.

Avalanche looks like it could be headed the same way as Solana. After enjoying an 34% uptrend since Jun. 30, AVAX failed to slice through the 200-hour moving average on its six-hour chart. The rejection has led to a spike in selling pressure that could lead to further losses after the TD Sequential presented a sell signal. 

The recent six-hour candlestick close below $20 may have confirmed the pessimistic outlook. Now, AVAX appears to be heading toward the 50-hour moving average at $18. From there, it could collect liquidity for a potential rebound.

Given the strength of the recent correction, Solana and Avalanche need to print sustained closes above their 200-hours moving average to be able to invalidate the bearish outlooks. If they succeed, SOL could rise to $43, while AXAX could make a break for $24.

Disclosure: At the time of writing, the author of this feature owned BTC and ETH.