A reversal pattern for Stellar [XLM] has these few implications

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Dis­claimer: The find­ings of the fol­low­ing analy­sis are the sole opin­ions of the writer and should not be con­sid­ered invest­ment advice.

Stellar’s [XLM] efforts to weak­en the four-month trend­line resis­tance (white, dashed) came to fruition as the bulls flipped it to sup­port fol­low­ing their recent ral­ly. The lat­est buy­ing resur­gence entailed a ris­ing wedge struc­ture, one that eyed to retest the $0.125-ceiling.

A com­pelling close above its present pat­tern would posi­tion it to inval­i­date the bear­ish incli­na­tions. The bulls need to ramp up buy­ing vol­umes to sus­tain their ongo­ing buy­ing streak. At the time of writ­ing, XLM was trad­ing at $0.124, up by 3.36% in the last 24 hours.

XLM Daily Chart

Source: Trad­ingView, XLM/USD

XLM’s pre­vi­ous down­trend chalked out the four-month trend­line sup­port (pre­vi­ous resis­tance) on the dai­ly chart. How­ev­er, after drop­ping down towards its 20-month low on 13 July, buy­ers have regained their momentum. 

As a result, the price action jumped above its near-term EMAs. Even so, the 20 EMA (red) was yet to bull­ish­ly cross above the 50 EMA (Cyan) and con­firm a robust uptick in buy­ing edge. Such a crossover could height­en the chances of a bear­ish invalidation.

Should the $0.12-resistance reignite the sell­ing pow­er, the alt could see a slug­gish phase with­in the pat­tern. How­ev­er, the morn­ing star can­dle­sticks could help the bulls main­tain their advan­tage. A close beyond the $0.12-level would open a door­way for test­ing the $0.135-level.

How­ev­er, a like­ly bear­ish revival at the $0.12-mark can delay near-term recov­ery prospects. Any close below the pat­tern could see a slug­gish phase near the Point of Con­trol (POC, red).

Rationale

Source: Trad­ingView, XLM/USD

The Rel­a­tive Strength Index took a bull­ish stance, espe­cial­ly after flip­ping the 57-mark to imme­di­ate sup­port. A posi­tion above this lev­el would reflect a con­ducive envi­ron­ment for con­tin­ued growth.

Fur­ther­more, the OBV res­onat­ed with increas­ing buy­ing pres­sure but could not repli­cate price actions at high­er peaks over the last week. Thus, any rever­sals on the OBV could affirm a bear­ish divergence. 

The DMI lines pro­ject­ed a strong buy­ing edge while the ‑DI still looked south. Nonethe­less, the ADX dis­played a sub­stan­tial­ly weak direc­tion­al trend for XLM.

Conclusion

Con­sid­er­ing the ris­ing wedge struc­ture approach­ing the $0.125-ceiling, the sell­ers would look to invoke their edge. A close above this resis­tance can encour­age bear­ish inval­i­da­tion. The tar­gets would remain the same as discussed.

Final­ly, investors/traders should fac­tor in broad­er mar­ket sen­ti­ment and on-chain devel­op­ments to make a prof­itable move.

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