Stellar price has been falling since May 2021.
Stellar (XLM) price is showing signs that the ongoing correction since November 2021 may be coming to an end.
Stellar is a decentralized network created by the Stellar Development Foundation. The network’s native crypto asset is XLM, which helps manage cross-border transactions and transaction fees. Stellar also serves as a decentralized marketplace and exchange.
With the XLM price stuck in a bear market for over a year, there are signs that the correction may end soon.
Long-term Price Corrections
The Stellar price has been falling since May 2021 when it traded as high as $0.798. The XLM price created a lower high in November of the same year, and then accelerated its downward pace thereafter.
So far, the XLM price reached a low of $0.072 on December 15 this year. The lower move triggered a breakout of the $0.084 horizontal support zone. This is a crucial development, as the zone had intermittently played the role of resistance and support since 2019.
If the lower move continues, the next closest support zone would be at $0.062. The decline is supported by the weekly RSI, which is down and has invalidated its bullish divergence trend line.
On a weekly basis, the only bullish sign for the XLM price is that the move is contained within a falling wedge, considered a bullish reversal pattern.
However, even if the wedge is set up correctly, the price of XLM may gradually decline within it until it reaches the $0.062 support zone. A break of the wedge would also indicate a recovery of the $0.084 resistance zone. This would imply that a bullish reversal has begun.
XLM Price Could Start a Rally
The daily chart offers a more bullish outlook than the weekly chart. The main reason for this is the RSI reading. The indicator generated a bullish divergence in a one-month time frame and broke out of its oversold territory. These are two signs that a bullish move is expected soon.
The fact that the divergence took place right at the support line level of the wedge increases its importance and makes it more likely that the price of Stellar will rise. If such a rise occurs, the $0.084 area should provide resistance.
Conversely, a daily close below the support line of the wedge would suggest that further lows are likely. This could push the price of XLM toward the $0.062 support zone.
Wave Number Admits a Bottom Would Have Been Found
Finally, the wave count lines up with the possibility of a bottom. Since the beginning of October, the price of XLM has completed a downward movement in five waves. The main feature of this formation is the symmetrical triangle of the fourth wave. Also, the fifth wave ended near the 1.61 outside retracement of the fourth wave, which is common in this type of formation. A drop below the $0.072 low would invalidate this wave count.
To conclude, while the weekly time frame readings are still bearish, the three reasons mentioned above indicate that the XLM price correction may end soon.
By Audy Castaneda
