Stellar Lumens (XLM) price signal shows that the ongoing correction from November 2021 may end.
Stellar is a decentralized network created by the Stellar Development Foundation. The native crypto asset for the network is XLM, which helps with cross-border transactions and transaction fees. Stellar also serves as a marketplace and decentralized exchange.
While XLM price has been holding steady in a bear market for over a year, some signs suggest that the correction may soon end.
long term stellar price correction
Stellar price has declined since May 2021 when it was trading at a high of $0.798. XLM price made a lower high in November of the same year and subsequently accelerated its rate of decline.
So far, XLM price has reached a low of $0.072 on December 15. The downside movement caused a break above the $0.084 horizontal support area. This was a significant development as this area had intermittently acted as both resistance and support since 2019. As a result, the decline suggests that the long-term trend is bearish.
If the downside momentum continues, the next closest support area will be at $0.062. The bears are supported by the weekly RSI, which is turning down and has invalidated its bullish divergence trend line (green line).
On the weekly time frame, the only bullish signal for Stellar price is that the movement is contained inside a descending wedge. The wedge is considered a bullish pattern.
However, even if the wedge corrects the pattern, XLM price could slowly slide inside it until it reaches the $0.062 support area. A breakout from the wedge would also mean a retest of the $0.084 resistance area. This would indicate that a bullish reversal has started.
XLM price may start rally
The daily chart provides a more bullish outlook than the weekly. The main reason for this is the RSI reading. The indicator has generated a bullish divergence over a one-month period (green line) and has crossed its oversold zone. Both of these are indications that an upward move is expected.
The fact that the divergence occurs right on the support line of the wedge enhances its importance and makes it more likely that a stellar price move will follow. If so, the $0.084 area is expected to provide resistance.
Conversely, a daily close below the support line of the wedge would suggest that new lows are likely instead. This could drive the XLM price towards the $0.062 support area.
Wave count supports bottom
Lastly, the wave count aligns with the downside potential. Since the beginning of October, XLM price has completed a five-wave downward movement (black). The defining characteristic of this formation is the symmetrical triangle in wave four. Additionally, wave five ended close to the 1.61 outside retracement of wave four, which is common in such formations. is given in sub-wave count (red).
A further drop below the $0.072 low would invalidate this wave count.
To conclude, while readings from the weekly time frame are still bearish, three reasons indicate that the XLM price correction may end soon:
- descending wedge
- wave count
- bullish divergence in rsi
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