Stellar is Hot — Bothered — And Ready to POP! (XLM)

Hi friends! Let's take a look at Stellar! Looking at the four hour chart, we can see that XLM has rallied nicely from Wednesday's low. However, it's now running into resistance at the 50 EMA (in orange,) the 50% retracement level, and the top of the falling parallel channel. While I was analyzing this chart, I was trying to determine if the pattern pushing up into the falling parallel channel (pink circle) was a bull flag or not. On the four hour chart, it's a bit hard to see what's going on, so I decided to look at it on another time frame. When I pulled up the two hour chart, I could immediately see that the formation inside of the pink circle is a small head and shoulders pattern. Seeing that pattern convinced me that it is most likely to break to the downside, and therefore not a bull flag. Additionally, XLM has failed to breakout of the falling parallel channel on multiple occasions, making an upside breakout unlikely. Momentum is also rolling over to the downside, as the bulls give way to the bears. Looking at the price action inside of the pink circle, we can clearly see that XLM is being compressed between several support and resistance levels. Typically, when this happens, it results in an explosive move in one direction or another. Volume is practically nonexistent, as traders wait to see which direction XLM will break, before jumping in. If XLM has a sustained breakout to the upside, that would be a solid milestone for the bulls. They would be able to clear the 50% retrace, the 50 EMA, and the top of the falling parallel channel in one fell swoop. However, I don't think that is the most likely scenario. Given the small head and shoulders pattern in the pink circle, the falling parallel channel, the overhead resistance, the many failed breakout attempts, and the rolling momentum, I think a break to the downside is more likely to occur. Either way, we will know soon enough, and we will be given some clear confirmation as to which direction XLM will trade from here. On the downside, a break below the 200 EMA (in purple) should send Stellar down to the 61.8% retracement level, around 40 cents. A break below that should send XLM down to the black trendline support.

This has been your not-so-humble market wizard, droppin' knowledge like bombs in this place! Please follow, comment, like, and share on social media! Good luck trading everyone.

***This information is not a recommendation to buy or sell. It is to be used for educational purposes only.***

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-JD-