Stellar (XLM) price fell sharply last week after being rejected by a long-term resistance area.
XLM is trying to find support within a short-term pattern, although there are no signs of strength in the short-term yet. Will the price be able to bounce back, or will it crash below it instead?
Premium price drops after rejection
Stellar’s value has been increasing steadily since the beginning of the year. There was a notable breakout in January when the price broke through the descending resistance line that had been in place since the all-time high. Large upward movements often follow when there is a breakout from a long-term structure. Indicates that the correction has finished.
After confirming the resistance line as support, as indicated by the green symbol, XLM price reached the long-term resistance level at $0.105. But it failed to breach and create a bearish engulfing candle last week.
This is a type of bearish candlestick where the previous period’s low is completely negated in the next candle. This is confirmed by closing lower than the opening price of the previous periods.
Besides rejection, the weekly relative strength index (RSI) provides a relatively bearish reading. Traders use the RSI as a momentum indicator to assess whether the market is overbought or oversold, and to determine whether to accumulate or sell an asset. The bulls still have the advantage if the RSI reading is above 50 and the trend is up.
but, If the reading is less than 50, the opposite is true. The RSI is currently decreasing and below 50 (red circle), which is a sign of a downtrend. If the decline continues, the nearest support area will be at the $0.076 average price.
XLM Price Prediction: Weak Momentum After Divergence
The technical analysis from the daily time frame is in line with the weekly readings, which gives a bearish prediction for XLM price.
There are many reasons for this. Firstly, XLM price fell within the boundaries of the ascending parallel channel after moving above it. When the price deviates above the resistance level and drops below it after that, it is considered a sign of weakness, as the breakout cannot be sustained. This is often followed by a sharp downward movement, as was the case with XLM.
Second, the move since the beginning of the year looks like a corrective ABC structure completed (black), with waves A:C having a ratio of 1.27 (white). Elliott Wave theory, which is used by technical analysts, involves analyzing long-term recurring price patterns and investor psychology to determine the direction of a trend.
The ABC structure is corrective, and since it is facing the uptrend, it means that the trend is down.
Finally, the 6-hour RSI has dropped below 50 (red circle) and is decreasing. As a result, the most likely future price prediction is for a drop to the pattern support line at $0.080, which is close to the previously identified horizontal support area.
This bearish XLM price prediction will be invalidated if the price breaks out from the channel. In this case, it could clear the $0.105 resistance area and move towards the next resistance at $0.150.
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In line with Trust Project guidelines, this price analysis article is for informational purposes only and should not be considered financial or investment advice. BeInCrypto is committed to accurate and unbiased reporting, but market conditions are subject to change without notice. Always do your own research and consult with a professional before making any financial decisions.