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Solana and Terra could be bound for retracements as the technicals suggest both tokens sit in overbought territory.
Solana Flips Terra
Solana and Terra look ready to retrace.
In the past two weeks, SOL and LUNA have outperformed most of the market after posting double-digit rallies.
Solana has reclaimed the title of sixth-largest cryptocurrency by market cap, overtaking Terra. It most recently overtook the competing Layer 1 network when SOL hit a high of $143.50 while LUNA consolidated around $110. Still, a particular technical indicator suggests that both Layer 1 tokens are bound for a brief correction that could shuffle the rankings once again.
The Tom DeMark (TD) Sequential indicator is currently presenting a sell signal on Solana’s two-day chart. The bearish formation developed as a green nine candlestick after SOL rallied to $143.50.
A spike in profit-taking could validate the pessimistic outlook, leading to a one to four two-day candlesticks correction towards $112.20 or even $104.
The TD Sequential indicator has also presented a sell signal on Terra’s two-day chart after LUNA hit a new all-time high at $118.10. This technical indicator has been relatively precise at anticipating local tops and bottoms on LUNA’s trend in the past, which adds credence to the pessimistic outlook.
If sell orders increased around the current price levels, Terra could dive to $95.40. Breaching the crucial support zone could push LUNA further down toward $80.60 or even $71.60.
Although the technicals point to a short-term correction, the amount of speculation around Solana and Terra cannot be disregarded. Terra has gathered a particularly strong buzz due to the Luna Foundation Guard’s ongoing Bitcoin accumulation (the organization has committed to accumulating $3 billion worth of Bitcoin to act as a reserve for UST). A sustained closed above the swing highs could encourage sidelined investors to re-enter the market.
SOL could invalidate the bearish thesis and target $171 if it closes above $143.50, while LUNA needs to slice through $118.10. If it succeeds, it could advance to $155.10.
Disclosure: At the time of writing, the author of this piece owned BTC and ETH.