The Stellar (XLM) price has fallen since a long-term resistance area rejected it at the end of May.
Even though there are signs of a potential bounce developing, the majority of long- and short-term readings suggest that the trend is still bearish.
Stellar Price Fails to Sustain Breakout
Since the start of the year, the value of Stellar has been steadily increasing. In January, there was a notable breakthrough when the price moved above a descending resistance line that had been in place since its all-time high.
This kind of breakout from a long-term structure often leads to significant upward movements and indicates the end of a correction.
Afterward, the XLM price rose to the long-standing resistance level at an average price of $0.105. However, it failed to break out and instead created a bearish engulfing candlestick during the week of April 17-24.
This type of candlestick is bearish and negates the entire previous period’s decrease in the next one, which is confirmed by a close below the previous period’s opening price.
The weekly RSI also provides a bearish reading. When evaluating market conditions, traders use the Relative Strength Index (RSI) as a momentum indicator to determine whether a market is overbought or oversold and whether to accumulate or sell an asset.
If the RSI reading is above 50 and the trend is upward, bulls still have an advantage, but if the reading is below 50, the opposite is true. The current RSI reading is bearish and supports the continuation of the decrease.
XLM Price Prediction: Mixed RSI Signs Cause Confusion
The bearish prediction for the XLM price aligns with the technical analysis from the daily timeframe. However, the RSI provides a bullish reading that causes some confusion. The bearish signs come from the price action and wave count.
While the XLM price broke out from an ascending parallel channel on March 29, it fell below its resistance line afterward. This deviation is considered a bearish sign that often leads to future price decreases.
Moreover, the wave count shows a completed A-B-C correction, which aligns with the bearish price action. To determine the direction of a trend, technical analysts use the Elliott Wave theory.
Which involves studying recurring long-term price patterns and investor psychology. The corrective structure and deviation both align with a bearish reading.
However, the RSI casts some doubt on the overall bearish sentiment. Even though the RSI is below 50, it has generated a bullish divergence (green line).
A bullish divergence occurs when a decrease in momentum does not accompany a price decrease. This often leads to upward movements. In this case, it could lead to an increase toward the channel’s resistance line at $0.105.
Afterward, whether the XLM price breaks out or gets rejected will determine the future trend’s direction.
This bullish XLM price prediction will be negated if the price closes below the channel’s midline.
A decrease toward its support line at $0.080 can occur in that case.
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