Is XLM Consolidating Before a Breakout?

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In Brief
  • XLM is trading just below a long-term resistance at $0.19.

  • The alt-coin is trading inside a symmetrical triangle.

  • It is in sub-wave 4 of an extended third wave.

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The Stellar (XLM) price is consolidating inside a symmetrical triangle right below a long-term resistance area. While it is possible that XLM breaks down from the triangle and reaches a slightly lower low, the long-term trend seems to be bullish and XLM is expected to eventually break out above the resistance area.

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Long-Term Levels

During the week of Nov. 16-23, the XLM price price created a significant bullish candlestick in the weekly time-frame. XLM followed it up with another considerable increase the next week. It culminated with a high of $0.23; a more than 200% increase in just two weeks.

XLM trades currently only slightly below the long-term $0.19 resistance area. It has not closed above this area since it initially broke down on Oct. 2018.

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Technical indicators provide somewhat mixed signals. While the Stochastic Oscillator made a bearish cross (red arrow in the image below), both the MACD and RSI are still increasing.

The closest, sufficiently validated support area is all the way down at $0.08. While the $0.11 area could possibly act as support (solid black line), it has not yet been confirmed as such.

(Note: The logarithmic chart is used in the image below in order to better visualize large price fluctuations)

XLM Chart By TradingView

Parabolic Increase

The daily chart shows that the rejection from the long-term resistance area was preceded by a bearish divergence in the daily RSI. In addition, XLM created several long upper wicks prior to moving downwards, in a decrease that is still ongoing.

The main support area is found between the 0.5-0.618 Fib retracement levels, at $0.132-$0.151.

Indicators in the daily time-frame are neutral/bearish, since the RSI has decreased below 70 & the MACD has lost steam. However, it has not crossed below 0 nor has the Stochastic Oscillator made a bearish cross.

XLM Chart By TradingView

The even shorter-term two-hour chart shows a developing symmetrical triangle, with XLM having just bounced at its support line. However, there is very strong resistance at $0.18, coinciding with both a horizontal level and the descending resistance line drawn from the Nov. 26 highs.

Technical indicators are mixed. While the MACD shows signs of strength, suggesting a possible breakout could ensue, the RSI is below 50 and possibly generating hidden bearish divergence.

Therefore, until XLM clearly breaks out above the $0.18 area and validates it as support, we cannot consider the trend to be bullish.

XLM Chart By TradingView

Cryptocurrency trader @pakicrypto outlined a XLM chart which shows a symmetrical triangle, and stated that the price is ready to break out. The triangle coincides with that which we have outlined, but due to the conflicting readings from indicators, a look at the wave count is required in order to determine if XLM will break out.

Source: Twitter

Wave Count

Beginning in March, XLM seems to have initiated a bullish impulse (shown in white below), currently being in the third wave, which has become extended. The sub-wave count is given in orange, and XLM is in sub-wave 4.

A likely target for the top of the third wave is found at $0.35, the 3.61 Fib extension of wave 1 and a horizontal resistance level.

The 2.61 or 4.61 Fib extension levels could also serve as the top, but are less likely to do so.

XLM Chart By TradingView

A closer look at the movement reveals that is is possible that XLM has already reached the bottom of sub-wave 4, due to the bounce right at the support line of the parallel channel. This would also fit with the triangle possibility, since triangles are B or 4 waves.

However, if a breakdown from the triangle occurs, XLM would likely not find support all the way down to $0.106. This is the 0.786 Fib retracement level and the resistance line of a channel connecting sub-waves 1-2. This deep retracement is known as a 4th wave pullback.

XLM Chart By TradingView

Conclusion

To conclude, XLM is expected to eventually break out above the resistance area and reach a high near. However, whether it breaks down from the  triangle will determine if XLM has reached a short-term low or if another low is required before XLM breaks out.

For BeInCrypto’s previous Bitcoin analysis, click here!

Disclaimer: Cryptocurrency trading carries a high level of risk and may not be suitable for all investors. The views expressed in this article do not reflect those of BeInCrypto

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All the information contained on our website is published in good faith and for general information purposes only. Any action the reader takes upon the information found on our website is strictly at their own risk.
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Valdrin discovered cryptocurrencies while he was getting his MSc in Financial Markets from the Barcelona graduate school of Economics. Shortly after graduating, he began writing for several different cryptocurrency related websites as a freelancer before eventually taking on the role of BeInCrypto's Senior Analyst.

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