Solana’s SOL has surged over 7% this week, reaching $193. The price has rebounded off a former resistance-turned-support, identified by a trendline connecting highs from March and July. This line, along with one joining April and August lows, defines a large descending channel from March to October. Prices broke out of this channel in early November, confirming a bullish bias. SOL quickly climbed to over $260 before retracing to the breakout point last week. This roundtrip is known as a bullish “throwback pattern” by technical analysts. Throwbacks occur when prices break out upward and then return to their breakout level, providing a second, lesser-risk opportunity for traders. Breakout traders look for securities that have struggled to surpass a specific level, entering the market when the price finally breaks through, anticipating substantial movement. The throwback pattern in SOL can be explained by behavioral aspects of trading, particularly prospect theory, which suggests traders are risk-averse when securing gains. If SOL continues to rise, those who took profits soon after the initial breakout might regret it and take fresh longs, further adding to the bullish momentum. However, the bullish throwback pattern will be invalidated if SOL’s price bounce fails, allowing for a retrace back into the channel.
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