Disclaimer: The findings of the following analysis are the sole opinions of the writer and should not be taken as investment advice
In 2020, Stellar Lumens yielded returns of 188%, far better than its competitor XRP, even before the latter’s lawsuit. However, recently, the cryptocurrency saw a drastic drop in its price – 46% in the last 36 days and 3.5% in the last 24 hours. In fact, XLM dropped out of the top-10 and at press time, was the 15th largest cryptocurrency in the world.
Old coins like XRP and XLM might continue their descent into the abyss as newer coins like DOT take over the attention of investors. Regardless, the next bull run might be the last bull run for these altcoins.
XLM 1-day chart
Source: XLMUSD on TradingView
The one-day chart for XLM showed the aforementioned price drop forming two potential patterns – falling wedge and descending channel [Both of which are bullish in nature]. Hence, we can expect XLM to perform well in the next few days. On the face of it, this seemed unusual for XLM as an altcoin because most altcoins tend to follow Bitcoin or even Ethereum’s footsteps.
Interestingly, XLM had fallen on the charts despite the market’s bullish rally, indicating that XLM’s correlation to the overall market dropped recently. One could use this to his/her advantage by using XLM to hedge in the short-term [very risky] or use this to trade.
At the time of writing, XLM was expected to either bounce from the bottom of the wedge and rise higher, invalidating the channel pattern, or invalidate the wedge and hit the bottom of the channel. In either of the two scenarios, XLM will bounce after this drop [which will be another 10-20% drop] and the crypto will continue its journey towards the breakout.
A wild-card scenario would be XLM disregarding either of these patterns and heading lower on the charts. In this case, we will have three support lines, the most immediate one at $0.117, followed by $0.100 and $0.085. The last support would mean a drop of 31%.
Conclusion
These events might take a few days to unfold, hence, it is better to keep away from XLM if one wants to long it. On the other hand, shorting XLM might seem like a good idea, provided one is mindful of the aforementioned price levels.
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