The central theses
- The market value of Solana and Terra has fallen more than 23% over the past week.
- Both Layer 1 tokens are now sitting at make-or-break points that will determine their fate.
- A break of support or resistance could result in significant movement for both assets.
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Solana and Terra have hit critical support areas after suffering significant losses over the past week. Still, buying pressure has yet to increase for both assets.
Solana and Terra reach critical points
Solana and Terra have found important support levels.
The Layer 1 tokens appear to be trading at make-or-break points thereafter trace back by more than 23% in the past week.
Solana is currently testing the upper bound of the parallel channel that has been developing on its four-hour chart. Trading history shows that each time SOL rose to this resistance trendline, a rejection occurred, causing prices to retrace to the lower edge of the channel.
A similar market reaction could see the layer 1 token break the $108 support level and decline 10% towards the lower trendline of the channel around $100.
However, as Solana has tested the upper border of the channel three times since March 5, resistance may be weakening. SOL’s current price level is critical as a crucial 4 hour candle close above $115 could invalidate the bearish outlook. A break of the crucial supply wall could result in a rally to $124.
Source: TradingView
Terra’s native token is also at a turning point in its trend. The Tom DeMark (TD) Sequential indicator recently presented a buy-signal in the form of a red nine-candle on the LUNA 12-hour chart. The bullish pattern expects a one to four candlestick bounce, but the buying pressure hasn’t increased yet.
The 100 hourly exponential moving average at $91 within this timeframe is the only level of support preventing LUNA from falling any further. Meanwhile, the 50 hourly exponential moving average at $100 acts as resistance and rejects any upward price action. Only a 12-hour candlestick closing outside of this price pocket can determine whether the optimistic thesis of the TD setup would be validated.
Source: TradingView
Due to the ambiguous outlook, traders will try to exercise patience regarding the current price levels. A crucial close above resistance could propel LUNA to $110, while a break of support could lead to a decline to $82.
Disclosure: At the time of writing this article, the author of this article owned BTC and ETH.
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