The price of Solana risks getting caught in a bull trap after 50% of holders sell.
The price of Solana increased by 2.9% in the past 24 hours and broke through a key resistance of the inverse head-and-shoulders pattern on the 12-hour chart. This breakout often signals a trend reversal and has a greater than 50% chance of an upward move.
But this breakout phenomenon occurred while long-term holders were aggressively selling and leverage was rapidly increasing. Such conflicting signals create the risk of a classic bull trap, where early buyers may get stuck if momentum weakens.
The breakout signal indicates a potential upward move of 50%.
Solana has just broken above the upper boundary of the neckline of the inverse head-and-shoulders formation, and the downward sloping neckline is easier to break because resistance weakens over time as sellers accept lower selling prices. This increases the chances of a breakout but also raises the risk of a fakeout since this breakout does not clear strong resistance.
This breakout also pushes the price of Solana above the 20-period exponential moving average, or EMA, which is a trend identification tool. This level often signals that the strength of the trend is returning.
However, the last time Solana broke this moving average in early February, the upward move failed, and the price dropped nearly 12% afterward.
Meanwhile, hidden bearish divergence was observed between February 2 and 21 at the time of reporting. During this period, Solana's price created lower highs while the Relative Strength Index created higher highs.
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This divergence signals a weakening price strength, even though momentum indicators may rise. It usually occurs before a consolidation and indicates that this breakout may fail if buyers cannot maintain control. The same divergence occurred between February 2 and 15, leading to the aforementioned 12% correction.Bitcoin & binance
This bearish divergence remains in effect until Solana breaks above USD85.70. Moving above this level will temporarily reduce the divergence signal, but the price risk for Solana is not over until it breaks above a stronger resistance.Open Interest surged and the Funding Rate is positive, indicating a trap signal.Derivatives data confirms that traders are responding to the breakout, with open interest increasing from USD1.96 billion on February 20 to USD2.08 billion on February 21, representing a 6.1% increase in just one day.Open interest measures the total value of futures contracts that are still open. An increase in open interest during a breakout market indicates that traders are opening new positions rather than closing existing ones.Meanwhile, the funding rate has returned to positive at 0.0016% after previously being negative. The funding rate refers to the payments between long and short traders, and if the funding rate is positive, it means that long traders must pay short traders, indicating a bullish market sentiment.This composite data confirms that there are now players opening long positions using leverage based on the breakout signal, which is important because a bull trap requires buyers to get caught. When open interest increases and the funding rate returns to positive, it indicates that these traders are positioning themselves for a continuation. If the breakout signal fails, these leveraged long positions may need to sell, accelerating a price drop.The decline of the Holder Net Position indicates that long SOL investors are gradually withdrawing.However, the most significant warning comes from the behavior of long-term holders. The Hodler Net Position Change indicator will track the net changes in the amount of coins held by long-term holders over 30 days, and this group of investors will hold coins for no less than 155 days. This indicator will show whether experienced investors are accumulating or selling coins.On February 8, long holders bought nearly 1.98 million SOL, but by February 20, this figure had dropped to around 0.99 million SOL, representing a decrease of nearly 50%.This means that long-term holders have reduced their accumulation by half while an inverse head-and-shoulders bullish pattern has formed.Generally, long-term investors often start accumulating coins before prices surge and will sell when prices approach short-term peaks. Therefore, accumulation that seems to slow down or is actually gradual selling weakens the sustainability of the breakout signal.The cost level at USD91 sets the final price confirmation level for Solana.The Cost Basis Heatmap data reveals the points where investors last bought tokens, which become strong resistance levels as many holders tend to sell when the price hits their breakeven points.The nearest resistance level is between USD87 and USD88, with accumulation volume reaching up to 9.12 million SOL, creating immediate short-term resistance.Breaking above USD85.70 is a crucial first step as it will help reduce the hidden bearish divergence signal and strengthen the breakout. However, the more significant level is USD91.09.This level is above the nearest significant cost basis resistance. If it can break above, it will help absorb selling pressure from overhead supply and confirm that buyers are strong enough to maintain the breakout without being lured into selling at breakeven.If Solana can clear USD91.09, the target for the inverted head-and-shoulders breakout around USD129.78 will be possible, indicating an upward opportunity of about 50% from the breakout line.Even with the potential for an upward move, the downside risk remains significant. If Solana drops below USD78.88, the inverted head-and-shoulders will weaken, and the breakout pattern will start to fail.If the price drops below USD67.24, it will completely invalidate the inverted pattern. Such a move is likely to trigger liquidations of buy orders as leverage has increased during this period. Thus, Solana is at a critical decision point.As open interest increases by 6.1%, the borrowing interest rate returns to positive, and the supply from long holders decreases by 50%, all of which indicate market contradictions.If it breaks above USD91, it will confirm the breakout and open the path to USD129. A drop below USD78 increases the risk of a bull trap, while a drop below USD67 will confirm that the breakout has completely failed.
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