Trade Recommendation: Stellar
The Stellar/US Dollar (XLM/USD) pair started its downtrend on May 22, 2018 when it took out support of $0.30. This triggered the head and shoulders reversal pattern on the daily chart. Consequently, the pair nosedived as it created a series of lower highs and lower lows.
With this downward push, many investors have stayed away from the market. However, it looks like bottom pickers are beginning to make their presence felt.
Technical analysis show that Stellar/US Dollar is carving a bottom at $0.185 support. We have several reasons to support this view.
First, $0.185 is a key support area. Bulls showed up when the pair dropped to this level in the second half of March 2018. More importantly, they managed to defend the support and that enabled the market to rally. Three months later, it appears that bulls are doing the same thing.
The proof that bottom pickers are entering the scene can be seen in the volume. During the recent bear run, there were occasional volume spikes. However, when the market dropped to $0.185, volume immediately surged and it stayed elevated until XLM/USD went above $0.20. $0.185 appears to be an area where demand exceeds supply and where the pair can carve a bottom.
Lastly, the pair bounced from near oversold conditions on the daily RSI and breached resistance of 40. The former resistance is now acting as support for the market.
The strategy is to buy as close to $0.185 as possible. If bulls continue to defend the support, they will inspire a rally to our initial target of $0.25.
The process may take less than a month.
Daily Chart of XLM/USD on Kraken
As of this writing, the Stellar/US Dollar pair is trading at 0.192584 on Kraken.
Summary of Strategy
Buy: As close to $0.185 as possible.
Disclaimer: The writer owns bitcoin, Ethereum and other cryptocurrencies. He holds investment positions in the coins, but does not engage in short-term or day-trading.
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