Stellar [XLM] bulls exhausted after rally – Is a pullback nearby?

Key Takeaways

XLM rose as high as the January 2025 high at $0.515, but was forced to halt, at least for the time being. The 4-hour timeframe developed a bearish divergence, showing overextended market conditions.

Stellar [XLM] has challenged the high it set in mid-January 2025 at $0.515. After rallying 109.7% in a week, the XLM bulls were exhausted and forced backward.

Stellar and the rest of the crypto market remained bullishly biased, as Bitcoin [BTC] was in price discovery mode and witnessed high bullish conviction.

Ethereum [ETH], the altcoin market leader, was also set to rally further. AMBCrypto reported that a structurally driven divergence could see ETH climb to its ATH before the end of the year.

Source: XLM/USDT on TradingView

The weekly chart of XLM showed a firmly bullish structure. The first bullish structure break (orange) cane in May.

A higher high (green) at $0.334 was established later that month, and a higher low (white) at $0.216 was set in June.

The past week’s trading saw XLM rocket past the $0.334 high, challenging the $0.515 level from early 2025.

This was a strong sign of bullish conviction, but the rejection measured just over 11% at the time of writing. This could see XLM correct further. How deep should you expect the dip to go?

Mapping the potential XLM retracement

Source: XLM/USDT on TradingView

Based on the recent rally from $0.216 to $0.516, a set of Fibonacci retracement levels (white) were plotted. On the higher timeframes, the XLM structure was firmly bullish.

Even a retracement as deep as $0.28 would maintain the bullish weekly structure. However, it did not seem likely that the dip would extend that far.

The prime suspect for the next demand zone was the highs set in February at $0.364. This area coincided with the 50% retracement level of the recent rally. Therefore, traders can wait for a dip before buying.

The technical indicators on the daily timeframe did not show a pullback was imminent. The A/D soared higher to set new highs, reflecting intense demand in recent days.

The CMF also showed remarkable capital inflow recently, with a reading well above +0.05.

Source: CoinGlass

The liquidation heatmap indicated pockets of liquidity to the south. Long liquidations were present from $0.445 to $0.395. To the north, a liquidity cluster had built up just above $0.51.

Traders must manage their risk carefully and understand that these market conditions would not see much consolidation.

Rather, liquidity would be key, and the price could gravitate to nearby magnetic zones without much sideways price action, since speculative interest in these conditions was so high.

Disclaimer: The information presented does not constitute financial, investment, trading, or other types of advice and is solely the writer’s opinion