Market context

Solana (SOL) presents a unique structure when compared to the broader crypto market. Unlike Bitcoin, Total 2, Total 3, or the overall market cap, which have all formed bull flags, Solana has been range-bound since its breakout in March. On the daily timeframe, SOL has established equal highs and lows, indicating a large range, while Bitcoin has formed lower lows and lower highs, creating a classic bull flag pattern.

The Playbook

Setup 1: Scale-In strategy

Objective:

To scale into a SOL position by splitting the risk across key levels: $130, $120, and $110.

Hypothesis

The idea here is to manage risk by entering at multiple levels as the price draws down, leveraging the potential for a bullish rebound. This strategy acknowledges the possibility of significant drawdown, especially considering the wick that formed at $110 on August 5th.

The play

• Initial Entry: Start with a smaller position at $130.
• Scale-In: Add to the position at $120, and then again at $110.
• Risk Consideration: Given the bullish conviction, if the price moves closer to $110, consider increasing margin or utilizing more leverage to gain more exposure.

-Stop Loss: A 50% drawdown would place the liquidation level around $66-$65, which should be acceptable if you're taking a 2x leveraged position. However, expect substantial drawdown risk, especially at $110.

Leverage & margin

Consider using 2x leverage initially. As the price drops and you scale in, potentially increase leverage or margin. Remember, the lower the price, the higher the risk-to-reward ratio, but also the higher the risk.

Key levels:

• $130: First entry point. Allows participation in case of a bounce.
• $120: Strong historical support with multiple wicks near this level (April 13, April 30, July 24, July 5).
• $110: Psychological level and historical support, marked by the August 5th low.

Disclaimer: This is not financial or investment advice. You are responsible for any capital-related decisions you make, and only you are accountable for the results.

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Setup 2: High conviction entry at $120

Objective:

To take a high-conviction long position at the $120 level with tight risk management.

Hypothesis

$120 has proven to be a significant level for SOL, with multiple touches and wicks, indicating strong demand.

Given the overall bullish sentiment in the market, this level offers a high probability of a successful bounce, especially if Bitcoin and the broader market maintain their structure.

The play

Entry: Enter at $120 with a larger position size, considering the strength of this level. Leverage: Consider using 3x leverage, which allows the price to drop to $80 before liquidation or stop-out, depending on your risk appetite, 2x leverage would also be fine here as the deeper we go in price the better the rewards anyway

Risk management

Use lower leverage if adding more margin as the price drops, to avoid overexposure. The goal is to capture the expected upside while minimizing the risk of liquidation.

Cryptonarys take

In summary, the Solana setup involves managing risk across key levels, with a focus on $130, $120, and $110. The scale-in strategy allows for a more flexible approach, while the high conviction entry at $120 is for those looking for a more direct play. Patience and a clear understanding of the broader market structure are essential in executing these strategies effectively.

By positioning ourselves correctly and using the right leverage and margin, we can capitalize on the expected bullish rebound while controlling downside risk. However, remember, with added exposure comes added psychological pressure. The market will do what it wants, and every setup, no matter how strong the thesis is, has the chance of being a loss.

When we look at price predictions and understand the context we're in with this market, these levels still offer great spot-building opportunities, which should always be considered first in this early stage of the bull market. But the leverage options are here for those who are confident and want to gain more exposure.

Ensure every trade doesn’t offer too much risk to your capital, as the opportunity cost in building a spot bag and taking on higher-risk leverage trades is far stronger on the spot-building angle.