Stellar (XLM) Rejection from Resistance Could Kick Off a Huge Correction

A breakdown from this range is expected and could cause a sharp drop to follow.

XLM Trading Range

The XLM price has been increasing since it reached a local low of $0.667 on Sept 24. Shortly afterward, the price reclaimed the $0.073 area, validated it as support, and began to move upwards. The rally ended once the price reached the 0.382 Fib level of the entire downward move at $0.087. Since getting rejected, XLM has fallen back to the $0.073 level, which is now acting as support once more.

Technical indicators in the daily time-frame are bearish. The Stochastic Oscillator has made a bearish cross, the MACD has been rejected by the 0-line and the RSI is at risk of falling below 50. Therefore, a breakout above the $0.087 area seems unlikely at this time.

Short-Term Movement

The short-term chart is similarly bearish. After the rejection, XLM dropped to the $0.077 area, which is seemingly acting as support, creating a potential double-bottom pattern. However, there are no reversal signs in the form of bullish divergences. Furthermore, the RSI has fallen below 50 and the MACD is nearing negative territory, a sign that the price is likely to break down from this minor support area.

Wave Count

Cryptocurrency trader @cryptotony_ outlined an XLM chart, stating that the price might be in for an extended correction which could eventually cause the price to drop below $0.05.

Since reaching a high on Aug 17, it does seem like XLM has completed a bearish impulse (shown in black below), which is likely the A wave of an A-B-C corrective structure (white). The increase after the low (highlighted) does seem corrective, even if the exact wave count is not yet determined. Therefore, it is likely that the price has begun a corrective movement that could indeed eventually take it towards $0.05.

The possibility of a correction is also supported by the weekly chart. While the price is resting at support near $0.075, the Stochastic Oscillator has made a bearish cross, the RSI is at risk of dropping below 50, and the MACD was rejected by the 0-line, all bearish signs that suggest the price will continue to move downwards.

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