Solana (SOL) has been the talk of the town, as it has rallied explosively to reach new all-time highs this week. It has proven to be one of the altcoin leaders in the cryptocurrency space, after recovering strongly from the lows of July 2021 (22.100) to reach a high of 74.60 (at the time of writing) – a whopping 220+% gain in less than two months!

It briefly traded below the long-term 200-day moving average for two days, before starting this momentous rally towards the Golden Ratio.

What is the Golden Ratio?

The number 1.618 is the Golden Ratio, which describes patterns seen in nature. This ratio was discovered by Leonardo Fibonacci, who saw the repeating patterns all around us, seemingly keeping nature in balance. This ratio can be observed in various places, again and again – perhaps in the form of a miniscule atom under a microscope, the ratio of females to males in a beehive, a Da Vinci masterpiece, the most aesthetically symmetrical human face, or even in the unlimited vastness of the universe.

This Golden Ratio can of course also be found in the financial markets. Using the Fibonacci retracements, arcs, fans and time zones tool, you can see how prices interact at each level of the Fibonacci ratios, and how they become possible support or resistance. These ratios are typically 23.60%, 38.20%, 50.00%, 61.80%, 78.60%, 100.00%, and the golden ratio: 161.80%.

SOL Daily Timeframe chart: Looking to hit the Golden Ratio: 161.80%.

How is it applied to SOL?

Using the Fibonacci retracement level, plotting from the previous highs SOL reached in late May 2021, and measuring it down to the recent lows of July 2021, we can see how SOL behaved as it reached each level of the ratios.

The price movements of SOL, from 23.60%, 38.20%, 50.00% and 61.80%, have been eerily similar. Each level acted as a previous resistance turned support. Once it rallied above it, the previous level became a strong short-term support for SOL, creating a staircase pattern towards 61.80%. But once it broke above this level, SOL exploded tremendously, creating a full recovery of its previous retracement, and it is now heading towards the Golden Ratio of 161.80%, around the 76.30 to 80.00 levels.

SOL Trading Application: Protect your Profits

Since SOL has been trading at all-time high levels, this Golden Ratio could be a target area where traders would start to take profits. If you already have SOL, this could be a good place to protect your profits, as the price has already run up exponentially. A sudden sell-off could happen once there is too much greed in the markets.

Protect your profits by selling partial tranches on strength 25% to 50% of your position. You can still hold onto your core position, if you were able to get in on the action early, in case a continuation rally happens.

However, if you do not have SOL at this time, it would be best to just sit this one out and wait for a better opportunity to get in. At this point, the risk outweighs the rewards.