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.

Target: $0.25

Stop: $0.18

 

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.

Featured image courtesy of Shutterstock.

Kiril is a CFA Charterholder and financial professional with 5+ years of experience in financial writing, analysis and product ownership. He has passed all three CFA exams on first attempt and has a bachelor's degree with a specialty in finance. Kiril’s current focus is on cryptocurrencies and funds, as he does his own crypto research and is a Product Manager at Mitre Media. He also has his personal website, InvestorAcademy.org where he teaches people about the basics of investing. His ultimate goal is to help people with limited knowledge of finance and investments to create investment portfolios easily, and in line with their unique circumstances.