• XLM price hugging the secondary trend line of the ascending channel.
  • Second bearish reversal above channel reinforcements bearish tilt.
  • Bearish momentum divergence persists on multiple time frames, increasing downward pressure.

XLM price action since the bearish shooting star candle pattern on May 10 has been a mix of indecision and failed attempts to ascend the channel’s upper trend line. As long as Stellar does not close above the shooting star high on a daily basis, the bearish outlook takes precedent, targeting a 40% decline.

XLM price stalemate disguises a gradual deterioration in Stellar

Stellar rallied strongly in the early part of 2021. Still, XLM price has only managed to print marginal new highs in April and again in May, delivering a disappointing 30% return for Stellar from the February high to the May high.

On May 10, XLM price closed with a bearish shooting star candlestick on the daily chart. The finale of a powerful rally from the April low into the May 10 high at $0.780 provided a 100% gain for the timely investors. The candlestick reversal pattern is framed when buyers struggle to lift prices higher against the considerable distribution pressures of the sellers’.

On May 12, XLM price fell below the shooting star low at $0.618, confirming the bearish candlestick and a bearish thesis for the digital token. However, Stellar struck some buying pressure and briefly traded above the shooting star on May 16. Still, the rally quickly faded and shaped a second, loosely defined shooting star above the channel’s upper trend line.

The marginal new high printed by Stellar has now established a potential double top pattern with a trigger at $0.552. To successfully activate the pattern, XLM price will need to fall below the secondary trend line that has provided continuous support since the April low. A daily close below the trend line increases the odds that Stellar will extend the decline below the double bottom and target the channel’s lower trend line at $0.411, representing a 38% decline from price at the time of writing.

On the path to the channel’s lower trend line, XLM price will encounter support at the 50-day simple moving average (SMA) at $0.546, followed closely by the 61.8% Fibonacci retracement of the April-May advance at $0.538. Some support may materialize at the 78.6% retracement at $0.473, but it is anticipated the channel’s lower trend line at $0.411 will generate a form of capitulation.

Adding to the negative outlook is the bearish momentum divergence on the Stellar daily and weekly Relative Strength Indexes (RSI). It occurs when the RSI fails to print a new high with price, revealing a decline in price momentum.

XLM/USD daily chart

XLM/USD daily chart

A daily close above the second shooting star at $0.797 will invalidate the Stellar bearish outlook, and the channel’s upper trend line switches from resistance to support. Under this scenario, investors could see a rally to the junction of the 161.8% extension of the April decline at $0.983 and the psychologically important $1.00.


Note: All information on this page is subject to change. The use of this website constitutes acceptance of our user agreement. Please read our privacy policy and legal disclaimer. Opinions expressed at FXstreet.com are those of the individual authors and do not necessarily represent the opinion of FXstreet.com or its management. Risk Disclosure: Trading foreign exchange on margin carries a high level of risk, and may not be suitable for all investors. The high degree of leverage can work against you as well as for you. Before deciding to invest in foreign exchange you should carefully consider your investment objectives, level of experience, and risk appetite. The possibility exists that you could sustain a loss of some or all of your initial investment and therefore you should not invest money that you cannot afford to lose. You should be aware of all the risks associated with foreign exchange trading, and seek advice from an independent financial advisor if you have any doubts.

Recommended content


Recommended Content

Editors’ Picks

Ethereum attempts recovery following first rate cut in four years

Ethereum attempts recovery following first rate cut in four years

Ethereum is trading above $2,330 on Wednesday as the market is recovering following the Federal Reserve's decision to cut interest rates by 50 basis points. Meanwhile, Ethereum exchange-traded funds recorded $15.1 million in outflows.

More Ethereum News
Bitcoin offers diversity for traditional investors: BlackRock

Bitcoin offers diversity for traditional investors: BlackRock

Bitcoin (BTC) is trading above $60,000 on Wednesday following the release of BlackRock's latest white paper, which addresses some of the top crypto assets' unique advantages to investors compared to traditional asset classes.

More Bitcoin News
XRP pulls back 4% even as Ripple releases details of stablecoin RLUSD

XRP pulls back 4% even as Ripple releases details of stablecoin RLUSD

Ripple (XRP) shared details of its stablecoin project Ripple USD (RUSD) in a blog published on Tuesday. The cross-border payment remittance firm discusses relevant legislation and plans to support the digital asset economy through RLUSD. 

More Ripple News
Bitcoin traders keep powder dry ahead of Fed decision on interest rates

Bitcoin traders keep powder dry ahead of Fed decision on interest rates

Bitcoin retraces slightly, trading above $59,000 on Wednesday, as crypto markets brace for the upcoming interest-rate decision by the US Federal Reserve, which is expected to lower interest rates for the first time in more than four years.

More Bitcoin News
Bitcoin: On the road to $60,000

Bitcoin: On the road to $60,000

Bitcoin price retested and bounced off from the daily support level of $56,000 this week. US spot Bitcoin ETFs posted $140.7 million in inflows until Thursday and on-chain data supports a bullish outlook.

Read full analysis
Moneta Markets review 2024: All you need to know

Moneta Markets review 2024: All you need to know

VERIFIED In this review, the FXStreet team provides an independent and thorough analysis based on direct testing and real experiences with Moneta Markets – an excellent broker for novice to intermediate forex traders who want to broaden their knowledge base.

Read More

BTC

ETH

XRP