We continue to closely monitor the price action of all major cryptocurrencies in the world. Today, we are focusing on the 4th biggest coin by market capitalization – Stellar Lumens (XLM).
A week ago, Newconomy published an analysis of the XLM price action, following the breach of the key support, which resulted in the currency losing as much as half of its value. In the meantime, XLM has bounced off of the horizontal support block (rectangle shaded in green) and has retraced to the first significant resistance (Graph 1).
In that article, we said that,
“Once the neckline (the blue horizontal line) has been broken, the price pushed lower before completing the pattern around $0.143 level. Here, we can expect a minor bounce before continuing lower to test the 127.2% Fibonacci extension.”
Well, Stellar did exactly that.
Graph 1. Stellar Lumens (XLM) daily chart
The minor bounce has happened in the form of an ascending channel (purple-shaded channel), which when added to the previous price action (the red diagonal line), creating a “bear flag” formation.
The bear flag has the same structure as the bull flag but inverted. The flagpole forms on an almost vertical panic price drop as bulls get blindsided from the sellers, then a bounce that has parallel upper and lower trendlines, which form the flag.
The moment the flag is broken to the downside, the formation is activated.
Thus, we still expect the XLM to continue lower until it tests the 127.2% Fibonacci extension support, located just below $0.12. The ultimately bearish scenario consists of the push all the way to the 161.8% Fibonacci extension support, sitting at $0.052.
Currently, Stellar trades above $0.15 and is down more than 7% on the day.Leave a comment