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Cryptocurrencies have experienced a rebound from the massive sell-off on Monday, with Solana (SOL) leading the charge.

Solana (SOL) has emerged as a strong contender in the cryptocurrency market, often referred to as the “Ethereum killer.”

Solana as Ethereum Killer

Despite recent volatility, Solana offers compelling reasons for crypto traders to consider adding it to their portfolios.

1. Strong Fundamentals

Solana is one of the fastest blockchains, capable of processing over 65,000 transactions per second.

This scalability supports a growing number of decentralized applications (dApps) and users, highlighting the platform’s robust fundamentals.

Key metrics, such as increasing active users and decentralized exchange (DEX) volumes, underline Solana’s potential as a lasting player in the crypto space.

2. Undervalued Compared to Ethereum

Solana’s market cap is currently only 22% of Ethereum’s.

As Solana continues to grow and gain adoption, this gap with Ethereum may close, potentially leading to substantial upside.

3. Active On-Chain Activity

Solana shows consistent strength in on-chain activity, with high transaction volumes and user engagement.

The platform is poised for further growth, especially with anticipated upgrades and new features set to be unveiled at the upcoming Solana developer conference, Breakpoint.

4. Growing Ecosystem

Solana’s ecosystem is expanding rapidly, attracting developers, projects, and investors.

This growth drives demand for SOL tokens and strengthens the platform’s network effect, enhancing its overall value.

5. Institutional Confidence

Solana has gained the confidence of traditional finance (“TradFi”), with institutional investors viewing it as a lower-risk asset with high upside potential.

This endorsement adds credibility and security to Solana, making it an attractive option for a broad range of investors.

Fundamental Bullish Case:

Solana’s combination of speed, scalability, and growth potential makes it a standout in the crypto market.

Its current undervaluation compared to Ethereum, coupled with strong on-chain activity and a growing ecosystem, presents a strong case for investment.

For those looking to invest in a cryptocurrency with solid fundamentals and significant upside potential, Solana is worth considering.

Fundamentals are bullish, but what about the technicals?

Welcome to TA of the Day (TAOTD)! 👋

Let’s focus on the current technical setup of SOL/USD based on the daily chart:

📈 Technical Analysis of SOL/USD 1-Day Chart

Solana experienced a rapid rise, followed by an equally rapid fall, and is now showing signs of stabilization or potential recovery.

Using technical analysis concepts covered in our forex course, let’s analyze SOL/USD.

Simple Moving Averages:

  • 10-period SMA: Positioned around 152.70. The price is currently above this level, indicating short-term bullish momentum. The slope is upward, suggesting a potential short-term recovery.
  • 50-period SMA: Positioned around 152.05. The price is slightly above this level, reinforcing short-term bullish momentum. The slope is slightly downward, reflecting prior weakness, but the recent move above this level could signal a shift in sentiment.
  • 100-period SMA: Positioned around 154.74. The price is currently just above this level, indicating a tentative medium-term bullish sentiment. The slope is downward, reflecting ongoing medium-term weakness.
  • 200-period SMA: Positioned around 146.86. The price is above this level, indicating long-term bullish momentum. The slope is upward, confirming long-term bullish strength.

Relative Positioning of Moving Averages:

  • The 10-period SMA is currently above the 50-period, 100-period, and 200-period SMAs, indicating a short-term bullish crossover within a broader consolidation.
  • The 50-period SMA is above the 200-period SMA, forming a golden cross, which is generally considered a bullish signal., but it is slightly below the 100-period SMA, indicating some medium-term uncertainty.
  • The 100-period SMA is above the 200-period SMA, reinforcing the long-term bullish trend.
  • The widening gap between the 200 SMA and the other SMAs suggests increased volatility in recent months.

Relative Strength Index (RSI):

  • RSI: The current reading is 49.63, indicating that the market is in the neutral territory. This suggests that the price might face consolidation before making a decisive move.

Volume Analysis:

  • The recent price movement was accompanied by a significant spike in volume, suggesting strong participation and a potential change in market sentiment.
  • The high volume on the recovery day indicates strong buying interest at lower levels, which could support further upside.

🕵️ Key Observations

Price Action:

Let’s analyze the recent price action of SOLUSD:

  1. Sharp Rally: The chart shows a significant upward movement from late July to early August, with the price rising from around 140 to a peak near 190.
  2. New Local High: This rally established a new local high for the visible timeframe, reaching just below 190.
  3. Rejection at Peak: Upon reaching this peak, there’s a visible rejection with a long upper wick on the candle, indicating sellers stepping in at these elevated levels.
  4. Rapid Reversal: Following the peak, we observe a sharp reversal with a series of red (bearish) candles. This reversal is characterized by long-bodied candles, suggesting strong selling pressure.
  5. Steep Decline: The price fell rapidly from the peak near 190 to a low around 141, erasing most of the gains from the previous rally.
  6. Increased Volatility: The size of the recent candles, both bullish and bearish, indicates heightened volatility in the pair.
  7. Bounce from Low: After reaching the low around 141, there’s a noticeable bounce, with the price recovering to current levels around 156.
  8. Current Indecision: The most recent candles show some recovery, but with significant upper wicks, suggesting selling pressure at higher levels.

Support and Resistance Levels:

  • Support: Immediate support is around 146.86 (200-period SMA) and 154.74 (100-period SMA).
  • Resistance: Immediate resistance is around 152.70 (10-period SMA) and 152.05 (50-period SMA).

Moving Averages:

  • The 10-period and 50-period SMAs are currently acting as resistance, while the 100-period and 200-period SMAs provide critical support.
  • The tight clustering of shorter-term MAs indicates a potential consolidation phase, which could precede a significant price movement in either direction.
  • Watch for breaks above or below this cluster for potential trading signals.

RSI:

  • The RSI being in the neutral territory suggests a potential for consolidation before the next major move.

Market Structure:

  • Recent Swing Lows and Highs: The chart shows lower lows around 120 in early August and lower highs around 180 in late July, followed by a recent high around 162.
  • Break of Structure (BoS): A significant BoS occurred above the previous swing at 118 in late February, indicating a continuation of the uptrend. It’s been chop city since.
  • Change of Character (ChoCh): A ChoCh occurred when the price broke below the previous swing low of 1645  which caused a shift in market behavior from bullish to bearish. Price would need to reclaim this price level for the ChoCh to shift back to bullish.

🤔 Potential Trade Scenarios

Is Solana buy or sell?

The following trade scenarios are provided solely for educational purposes. Since they don’t include full risk management practices, they are not intended to serve as actual trade recommendations, but merely food for thought to help you generate your own trade idea.

Long Bias:

  • Entry Point: Consider entering a long position if the price finds support near 146.86 (200-period SMA) or 154.74 (100-period SMA) and shows signs of a bounce, such as a bullish candlestick pattern or a positive divergence in the RSI. Additionally, a breakout above the resistance level at 162 could indicate a potential recovery back to 200.
  • Stop-Loss: Consider setting a stop-loss below the support level of around 140 to manage risk.
  • Target: Look for a move towards 180 and higher if the uptrend resumes.
  • Rationale: Targeting 180 is based on the previous resistance level, which could act as a significant level for profit-taking. If the price manages to break above this level, it would indicate strong bullish momentum and the possibility of further upside.

Short Bias:

  • Entry Point: Consider entering a short position if the price fails to hold the support level at 146.86 (200-period SMA) and 154.74 (100-period SMA) and shows signs of bearish momentum, such as a strong bearish candlestick pattern or the RSI moving below 40.
  • Stop-Loss: Consider setting a stop-loss above the recent high at 162 to manage risk. This level is crucial as a break above it would invalidate the bearish setup.
  • Target: Initial target could be the support level around 130. If bearish momentum continues, look for further downside towards 120 or lower.
  • Rationale: Targeting 130 initially is due to it being a psychological and historical support level. If the price breaks below this level, it would signal further bearish momentum and the potential for more significant downside towards the next support level at 120.

📝 TAOTD Summary

  • Current Situation: Solana experienced a rapid rise, followed by an equally rapid fall, and is now showing signs of stabilization or potential recovery.
  • Trend: The long-term trend appears to be bullish with the price above the 200-period SMA, but the short-term and medium-term trends show signs of recovery after recent weakness, with prices currently challenging the 10-period and 50-period SMAs.
  • Key Levels: Support at 146.86 (200-period SMA) and 154.74 (100-period SMA), and resistance at 162 (recent high). Other key levels to watch are the recent swing high near 190 as resistance and the support around 140-145.
  • Momentum: The RSI indicates a neutral condition, suggesting potential for consolidation before the next major move.
  • Market Structure: This market structure suggests that while the overall trend is bullish, price is currently in a potential correction or consolidation phase
  • Volume Analysis: The significant spike in volume on the recovery day suggests strong buying interest at lower levels, which could support further upside.

This recent price action suggests a significant shift in sentiment from strongly bullish to bearish and then to a more neutral stance.

The price is currently in a recovery phase after a sharp correction, testing the cluster of moving averages as potential support/resistance.

A break above recent highs could signal a continuation of the bullish trend, while a break below key support levels could indicate a more significant change in the market structure.

The price action around the current moving average cluster (150-155) could determine the short-term direction.

⚠️ Remember, this analysis is based solely on the technical aspects shown in the chart. In the crypto market, fundamental factors, global liquidity conditions, overall risk sentiment of the financial markets, random proclamations by politicians, and regulatory news can have significant impacts on price. Always consider these factors and employ proper risk management in your trading decisions.

This content is strictly for informational purposes only and does not constitute as investment advice. Trading any financial market involves risk. Please read our Risk Disclosure to make sure you understand the risks involved.