Solana (SOL) took a surprising tumble, catching even the most confident investors off guard. With the token below $160, it faces its sharpest correction since late September amid massive liquidations and fragile technical signals. Despite the panic, indicators hint that the bullish cycle endures, leaving room for a swift rebound.
The breakdown of the ascending wedge pattern by Solana has marked the beginning of a structural correction phase. This technical configuration is generally considered a reversal signal. It now comes with two exponential moving average (EMA) crossovers that are closely watched by traders.
The first involves the 50-day EMA that is about to cross below the 100-day EMA. Additionally, the second sees the 20-day EMA dangerously approaching the 200-day EMA. These crossovers are called “death crosses” in technical terminology. They traditionally signal sellers taking control and often precede a new leg down before stabilization.
These configurations reinforce the bearish short-term structure and justify caution among traders. Historically, such signals have led to additional declines of 10 to 15% before a new sustainable support forms. However, technical analysis only tells part of the story.
Data from derivatives platforms provides crucial insight into the current dynamics of SOL’s price. Bybit’s 30-day figures show a striking contrast: only $103.9 million in long positions remain versus $1.45 billion in open short positions.
This colossal imbalance reveals that the recent correction primarily results from a cascade liquidation of leveraged long positions, rather than massive selling initiated by long-term holders. The purge of long positions is now practically complete, which mechanically reduces the potential for additional downside caused by forced liquidations.
Paradoxically, this situation creates conditions for a potential short squeeze. With such an asymmetric perpetual market favoring shorts, even a modest bounce could trigger a wave of short position liquidations. This causes a rapid technical rally. The $180 and $191 levels concentrate significant accumulations of shorts that could fuel such a movement.
On-chain analysis via the net position change of holders brings a reassuring perspective. Between October 7 and November 3, net outflows from long-term wallets decreased from -10.52 million SOL to just -1.37 million SOL, representing an 87% reduction in outflows.
This stabilization in long-term holder behavior sharply contrasts with the frenzied activity observed in derivatives markets. It suggests maintained conviction among core investors, who aren’t capitulating despite the correction. This resilience typically constitutes a precursor signal for market bottom formation.
The current $166 level represents an immediate support zone, just above the critical $163 area. If the latter gives way, $155 becomes the make-or-break level for Solana. A successful defense of this threshold, combined with the low number of remaining long positions, could mark the bottom of this correction. Conversely, a clean break below $155 would invalidate the stabilization scenario and pave the way for new lows.
To the upside, breaking above $191 could catalyze a cascade liquidation of shorts toward $200, or even $222 (Fibonacci level 0.786). The path of least resistance remains bearish in the short term. However, positioning fundamentals suggest that a rebound could occur sooner than anticipated by consensus.
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