The price of Solana breaks free from a symmetrical triangle continuation pattern and reclaims a tactically significant moving average.
Compound price is consolidating a 170 percent surge by creating the right shoulder of an inverted head-and-shoulders pattern.
Meanwhile, Bitcoin’s price is stuck near the lows of the June decline, devoid of any sustained, impulsive bid.
Since June 22, the decentralized finance (DeFi) industry has been a trove of interesting trading opportunities. SOL and COMP stand out on the charts for their relative strength and potential to detach from Bitcoin, the main cryptocurrency.
Solana price was up 89 percent from the June 22 low to yesterday’s high of $38.10, more than three times Bitcoin’s gain from the June 22 low to the June 29 high.
On June 30, the price of Solana broke free from a symmetrical triangle that had been building for several weeks, quickly lifting SOL over the tactically key 50-day simple moving average (SMA). It was a rare instance of relative strength in the cryptocurrency complex without Bitcoin as the leader.
Solana pricing has broken out of the continuation pattern after a long, notable rise that began at the end of December 2020. The SOL volume during pattern generation was significantly lower than average, which is typical of constructive symmetrical triangles. Furthermore, on June 22, when it failed to print a new correction bottom and displayed a bullish momentum divergence versus the overall cryptocurrency market, SOL first signaled leadership potential.
SOL has strengthened support by trading above two significant moving averages, the 50-day and 200-day. On further price strength, the 50-day SMA, which is now in a weak downtrend, should flip higher, reinforcing the fundamental support.
The symmetrical triangle pattern’s measured move is 67 percent, putting the Solana price goal at $58.95. The goal is just over the all-time high of $58.38 set on May 18, implying that if the rally picks up steam, SOL will set new highs. There is, however, one condition. If a retro occurs, there’s a good chance the cryptocurrency will fall short of its goal.
Assume that the bitcoin market has stabilized. In such event, Solana price is expected to manufacture a swift rally, as the entire DeFi space appears to have recaptured the positive trend that dominated the first months of 2021.
Daily chart of SOL/USDT
A Solana price closure below $31.36 would be a bearish indication, indicating that the symmetrical triangle flashback is becoming into a more serious concern. SOL has no firm support until it reaches the 200-day SMA at $21.83.
In just a few weeks, the compound price rallied 170 percent from its low of $196.46 on July 22, regaining the strategically significant 200-day SMA at $402.84 on July 4 and testing the early June highs at $465.00. COMP, like SOL, was propelled up by revived interest in the DeFi sector, as seen by the highest daily volume for an up day on July 5 and the first oversold reading on the daily Relative Strength Index (RSI) since early May.
The 170 percent increase in Compound price from the June 22 low to the June 29 high of $36,675 was more than 6 times that of Bitcoin.
Compound price is expected to consolidate gains and release the price constriction caused by the rapid increase in the short term. COMP, on the other hand, should find support near the 200-day SMA at $404.41, and the consolidation process should take a few days, if not longer.
Compound price is currently maintaining the 200-day SMA, and volume underlying the three-day decline is falling, implying that investors are not anxious to lock in profits. Continuing the reset would allow the 50-day SMA to revert higher, providing more support for any potential weakness that may emerge in the future.
If the scenario indicated above is followed, Compound price will form a generous inverse head-and-shoulders pattern with a measured move of 157 percent. A rise of such size would obliterate the all-time high of $911.00 established on May 12 and set the bar for DeFi tokens and the cryptocurrency complex in general.
The first opportunity to start a long COMP position will be a daily close over $464.00, followed by a trade above the neckline, which is currently at $538.00.
Daily chart of the COMP/USDT
If Compound price logs a daily close below $372.00, it will negate the pattern and anticipate a more complex consolidation for COMP, based on symmetry and depth of the left shoulder.
SOL and COMP rose to the top of the leaderboard as a result of the restored bid in the DeFi area, which resulted in constructive price structures that produced exact entry and support levels. As a result, the Solana and Compound prices are well positioned to expand on the momentum and further separate from Bitcoin, which is trading below major moving averages and has yet to form a genuine rise.
Continued outperformance is based on relative strength, and overbought conditions tend to stay overbought for much longer than investors expect. SOL and COMP are in a good position for further gains on this basis./n
