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Solana Price Bullish Trap: 50% Holders Sell

Solana's price has risen 2.9% in the last 24 hours and is breaking above the neckline of a critical inverse head and shoulders pattern on the 12-hour chart. This breakout usually signals a trend reversal, offering upside potential of over 50%.

However, during this breakout, long-term investors are exiting the market aggressively and quickly opening leveraged positions. These conflicting signals raise the risk of a classic bull trap: If the momentum doesn't continue, early buyers could be cornered.
Breakout Shows 50% Upside Potential

Sona is recently breaking above the neckline of an inverse head and shoulders pattern. The descending neckline is easier to break through as it weakens over time due to sellers accepting the exit at lower prices. This increases the probability of a breakout, but also increases the risk of a fakeout because the resistance hasn't been fully overcome.

With the breakout, Solana is also rising above its 20-period exponential moving average (EMA).

This indicator is frequently used to capture trend reversals.

However, last February, when Solana crossed precisely above this average, the move failed, and the price fell by approximately 12%.

At the same time, between February 2nd and February 21st (at the time of writing), a hidden downward divergence is forming. During this period, while the Solana price is making a lower peak, the Relative Strength Index (RSI) is reaching a higher peak.
This divergence indicates weakening price strength, even as momentum indicators rise. Typically observed before a pullback, this suggests the breakout could fail if buyers lose control of the market. A similar divergence occurred between February 2nd and 15th, followed by the aforementioned 12% correction.

This bearish divergence remains valid unless Solana breaks above the $85.70 level. A potential rise could temporarily weaken this signal. However, overall Solana price risk persists unless stronger resistance levels are overcome.
Increase in Open Interest and Positive Funding Rate: A Trap Signal

Derivative data confirms that traders reacted quickly to the breakout. Open interest rose from $1.96 billion on February 20th to $2.08 billion on February 21st, a 6.1% increase in just one day.

Open interest represents the total value of active futures contracts. The increase in open interest during the breakout indicates that traders opened new positions instead of closing them.

Meanwhile, the funding rate, after turning negative, became positive at 0.0016%. The funding rate represents payments between long and short traders. Positive rates indicate that long traders are paying short traders, suggesting a bullish sentiment prevailing in the market.
This chart reveals that new leveraged long positions are being opened based on the breakout signal. Because for a bull trap to occur, new buyers need to enter the market. The increase in open positions and the positive funding rate indicate that traders are expecting a new uptrend. However, if the breakout fails, these leveraged long positions may be forced to sell, accelerating the decline.

SOL Holders' Net Position Decrease: Long-Term Investors Exiting

The most critical warning comes from long-term investor behavior. The Hodler Net Position Change metric shows the net change in the amount of tokens held in the portfolios of long-term investors over a 30-day period. This group consists of experienced investors who have held their coins for at least 155 days. The main purpose of the metric is to understand whether experienced investors are accumulating or selling.

On February 8th, long-term investors added approximately 1,980,000 SOL. By February 20th, this figure had dropped to almost 990,000 SOL. So that's almost a 50% drop.
This chart shows that long-term investors are halving their holdings as a bullish inverse head and shoulders pattern develops.

Long-term investors generally accumulate just before rallies and begin selling coins at local peaks. The current weak accumulation, and even sell-offs, jeopardizes the sustainability of the breakout.

In Solana, the $91 Cost Cluster Defined the Last Confirmation Level

The data shows the price ranges at which investors last bought their coins. These regions form strong resistance due to the tendency to sell coins near cost.

The strongest local cluster is between $87 and $88, with almost 9,120,000 SOL accumulated. This represents immediate resistance for the price.
Breaking above $85.70 is a crucial first step. This move would weaken the hidden downward divergence and strengthen the breakout. However, it's important to note that the truly critical level is $91.09.

This level is just above the nearest major cost-based resistance. A break above it would absorb selling pressure and confirm that buyers are truly strong, indicating that investors are not selling at break-even points.

If Solana breaks through the $91.09 barrier, the breakout target from the inverse head and shoulders pattern could reach $129.78. This indicates a potential gain of approximately 50% from the breakout line.

While there is upside potential, it's crucial to remember that downside risks are also significant. If Solana falls below $78.88, the inverse head and shoulders pattern will weaken sufficiently, and the breakout will become invalid.
A drop below $67.24 would completely invalidate the formation. This move would also increase the likelihood of long position liquidations due to the leverage accumulated recently. In short, Solana is currently at a critical juncture.

A 6.1% increase in open positions, a positive turn in funding rates, and a 50% decrease in the supply of long-term investors reveal that market forces are acting in opposition.

A breakout above $91 would indicate that the formation is working and the path towards $129 is open. Below $78 increases the risk of a bull trap. A drop below $67 would mean the breakout is completely unsuccessful.
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