Image Source: Pexels

SOL/USD broke out of a bull flag formation last week and ended the week strong. It managed to exceed the prior trend high of $209.90 and reach a high of $215.62. This week, it continued to strengthen, although on a relatively narrow range week, reaching a high of $225.37. That put the pair above the 88.6% Fibonacci retracement level at $215.41. Notice that the prior trend high was a little short of that retracement level but close enough to be valid, particularly given the subsequent bearish reaction.

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The first chart is the weekly time frame. It clearly shows the development of the bull flag. Notice that the orange 50-Week MA was successfully tested as support on a couple dips during its formation. This was eventually followed by a successful test of support last week at the purple 20-Week MA. That was the low before the bull breakout. On the daily chart it was the 50-Day MA that was tested. It is not unusual to see a test of a key moving average support prior to an accelerated move and it provides an additional indication that the breakout has a good chance of following through to the upside.

Notice that this week’s high completed a 200% extended rising ABCD pattern. So far it has indicated resistance and could lead to a pullback. If a deeper pullback develops, potential support levels include the prior swing high at $193.89 and the breakout area of $183.30. Further, the 20-Day MA is at $186.27 and may see signs of support.

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Given the obvious bullish move, SOL/USD will likely be on many traders watchlists. That should help to retain strong demand during a pullback. An initial upside target is at the 127.2% extended retracement of the decline that began from the March peak of $209.90. That level is further identified by a measured move. Notice that the current rally that began from the August swing low matches the advance seen in the January rally in a similar price area.  If the $260 record high can be exceeded, SOL/USD looks to be heading towards the 161.8% extension of the same decline at $271.64.

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