XLM/USD on verge of potentially breaking year-long resistance
Context Introduction:
XLM/USD has been caught within a descending wedge (bullish) for a bit over a year now. With Black Thursday's crash, bears really overextended themselves and even managed to temporarily break this wedge's support. However, a quick rebound helped regain the validity of the support. Since bears overextended themselves and were rejected, XLM/USD has now managed to reach the resistance of the descending wedge, where it has been consolidating for approximately a month now. Consolidating so close to such a significant resistance without a significant rejection (relative to the range of the descending wedge) for such a long period of time is allowing XLM/USD to gather momentum to attempt a strong break of the resistance. Additionally, XLM has been trading within an ascending channel since Black Thursday's crash and is now near the support of the channel, allowing for room for growth relative to this channel. The support of this channel and the resistance of the wedge form a symmetrical triangle (bullish).
What do the technical indicators tell us? (Daily Chart):
The MACD has been below zero for approximately 20 days now. Given that MACD is a lagging indicator and with today's rise, it is likely to cross over 0 soon. Additionally, it already established a higher low (reduced probability of a re-dip). With the MACD signaling a potential crossover soon and its extended time below 0, this increases the probability of an upside break of the wedge's resistance.
The RSI had been stuck in a downtrend ever since the start of the wedge that seems to have ended after Black Thursday's crash. We are now seeing higher lows and higher highs on the RSI. Additionally, the RSI barely managed to go below 50 during this recent consolidation, and has now risen to near 60. This shows that the bears were unable to garner significant enough strength to pull XLM away from the resistance. The RSI also signals room for growth.
Potential Risks:
If XLM/USD is strongly rejected at this resistance, watch out for a loss of support near horizontal support at ~$0.062. If such occurs, the next significant support lies at the 200D SMA (currently at ~$0.057) followed by another horizontal support level at ~$0.053. If this level is lost, watch out for levels near ~$0.04. At this point, if a low was established an inverse head and shoulders pattern could come into play on the daily timeframe, allowing a breakout of the wedge after such.
Likely Outcome:
Given the primarily bullish indications above, I predict a break of the descending wedge's resistance soon. If this resistance is decisively broken, expect a potential test of support (which very conveniently lines up with the ascending channel's support) at previous resistance before continuation.
Potential entry:
Upon successful test for support of rising wedge (~$0.07).
XLM/USD has been caught within a descending wedge (bullish) for a bit over a year now. With Black Thursday's crash, bears really overextended themselves and even managed to temporarily break this wedge's support. However, a quick rebound helped regain the validity of the support. Since bears overextended themselves and were rejected, XLM/USD has now managed to reach the resistance of the descending wedge, where it has been consolidating for approximately a month now. Consolidating so close to such a significant resistance without a significant rejection (relative to the range of the descending wedge) for such a long period of time is allowing XLM/USD to gather momentum to attempt a strong break of the resistance. Additionally, XLM has been trading within an ascending channel since Black Thursday's crash and is now near the support of the channel, allowing for room for growth relative to this channel. The support of this channel and the resistance of the wedge form a symmetrical triangle (bullish).
What do the technical indicators tell us? (Daily Chart):
The MACD has been below zero for approximately 20 days now. Given that MACD is a lagging indicator and with today's rise, it is likely to cross over 0 soon. Additionally, it already established a higher low (reduced probability of a re-dip). With the MACD signaling a potential crossover soon and its extended time below 0, this increases the probability of an upside break of the wedge's resistance.
The RSI had been stuck in a downtrend ever since the start of the wedge that seems to have ended after Black Thursday's crash. We are now seeing higher lows and higher highs on the RSI. Additionally, the RSI barely managed to go below 50 during this recent consolidation, and has now risen to near 60. This shows that the bears were unable to garner significant enough strength to pull XLM away from the resistance. The RSI also signals room for growth.
Potential Risks:
If XLM/USD is strongly rejected at this resistance, watch out for a loss of support near horizontal support at ~$0.062. If such occurs, the next significant support lies at the 200D SMA (currently at ~$0.057) followed by another horizontal support level at ~$0.053. If this level is lost, watch out for levels near ~$0.04. At this point, if a low was established an inverse head and shoulders pattern could come into play on the daily timeframe, allowing a breakout of the wedge after such.
Likely Outcome:
Given the primarily bullish indications above, I predict a break of the descending wedge's resistance soon. If this resistance is decisively broken, expect a potential test of support (which very conveniently lines up with the ascending channel's support) at previous resistance before continuation.
Potential entry:
Upon successful test for support of rising wedge (~$0.07).
Trade active:
The resistance trend line has now been breached with a significant strength. Looking for a longer timeframe close above this level for smaller additional entries.
"Upon successful test for support of rising wedge (~$0.07)."
is meant to say
"Upon successful test for support at previous resistance of descending wedge (~$0.07)."