Stellar Price Analysis: Risk of Reversal? Key Levels to Watch

  • XLM/USD bulls were dealt a rejection attempting to breakout from bearish descending channel.
  • XLM/BTC trading within a huge demand area, that has historically found buyers on each occasion. Failure to hold could be deadly.

XLM/USD’s recent upside momentum has slowed down somewhat, after the chunky bull run that has been witnessed this week. The price had initially gained as much as 40%, before cooling, none surprising given the fast surge. Bulls managed to drive XLM to the highest levels seen since the start of December. It is certainly noteworthy given that the pair has been on the firm decline for the past five consecutive trading weeks. This will potentially mark the first set of weekly gains, seen since week of 5th November.

Has XLM/USD Hit the Bottom?

If just specifically looking at XLM/USD, it is very difficult to tell if the bottom has been hit. As this fall encountered, is very much unknown territory. The price was moving within the abyss, these movements and low levels have not been witnessed before. However, that not being the case when analysing XLM/BTC. The price dropped into a very well-known demand area, which tracks around 0.00002800 – 0.00003000. It has been forced to retreat to this in June, July, September and most recently, this month, December.

XLM/BTC weekly chart. Price is flirting with a huge demand zone.

On each occasion that XLM/BTC fell into the above-detailed demand area, a chunky amount of buying came into play. Seeing the price flying up towards the 0.00004000 area and beyond. Given the number of times it has come to the rescue essentially, that highlights just how key of region this is. Any failure of this finding buyers this time round, could be punishing to say the least. Such a development in this case, would be unknown territory seen for XLM/BTC, possibly leading to a mass amount of selling, sparking much ‘FUD’.

Daily Chart View – XLM/USD

XLM/USD daily chart. Price is trading within a bearish descending channel formation. Bulls rejected on 21st December attempting to breakout.

At the time of writing, XLM/USD is heading towards is second consecutive session potentially closing in the red. Price action has formed a descending channel formation, which has been in play since the early part of November. The price gradually falling within this technical view, having dropped as much as 67% in this channel. On Friday 21st December, the bulls attempting to breakout from this bearish pattern view, however, were dealt with rejection. As a result of this, the daily candle close does appear inviting to the bears.

If the bulls do not reclaim upside momentum, then XLM/USD could be forced to give up the recent gains seen. A retest back down towards the lower part of channel may be seen as an extreme near-term downside case. For greater upside opportunities, the bulls must breakout of the bearish set up. Resistance currently tracking around $0.1300, which is the upper trend line.

Disclaimer: The author owns bitcoin, Ethereum and other cryptocurrencies. He holds investment positions in the coins, but does not engage in short-term or day-trading.

Featured image courtesy of Shutterstock.

Author:
Ken has over 8 years exposure to the financial markets. During a large part of his career, he worked as an analyst, covering a variety of asset classes; forex, fixed income, commodities, equities and cryptocurrencies. Ken has gone on to become a regular contributor across several large news and analysis outlets.