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Technical analysis
Overall, it's a really strong move. SOL has smashed through the major overhead resistance at $26 and has tested into the next resistance at $30.40.After price broke out of the broadening wedge, it formed a bull flag and went meaningfully higher. Just look at this move generally; it’s gone up so much that you’d have to ask yourself how sustainable this is from here.
Let’s assess how overheated this is, and if there is a pullback in price, perhaps the most obvious level is the prior resistance of $26, which may now become the new support.
One main positive is that the volume is good. If this begins to decrease meaningfully, that may indicate the move higher is stalling/coming to an end.
RSI and funding rates
RSI? Where do we start? It’s at 79 on the daily, which is very overbought. The price is currently putting in a higher high at $29.65, while the oscillator is putting in a lower high - bearish divergence, although we need to see how price closes today’s candle.The funding rate is now very positive, indicating more longs than shorts, while open interest is at $470M – usually around the $330M mark. Open interest is up and relatively weighted towards longs.
This is frightening to play for sure, but if you wanted to short and waited for all the factors to align to do it, this is it; we’re there.
Conclusion on trading SOL
As mentioned above, SOL’s price has gone up massively - up 50% in the past 8 days. The Funding rate is positive, whilst SOL is at a major horizontal resistance of $30.40. Many of the factors align here and favour a short. The market has, however, been phenomenally strong, so shorting into these kinds of levels is frightening.Action
- We are taking the short trade between $29.50 to $30.40, but this is certainly not for the faint-hearted, and unless you’re comfortable with shorting, we’d suggest to steer clear of this.
- In general, we would suggest not fomo’ing in here and remaining patient on the sides to accumulate lower as a wise strategy.
- The risk to a SOL short is if BTC can break above the $31,300 to $32,000 level and help drive the whole market higher.
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