XLM returns to key support: Will $0.44 spark the next rally?

Key Takeaways

XLM has a strongly bullish outlook across multiple timeframes and has revisited the $0.42-$0.44 demand zone. The pullback might be over, unless Bitcoin drops below the $116.8k short-term support.

Stellar [XLM] was in a strong uptrend, but it could be time for a minor pullback. AMBCrypto reported that bulls may be exhausted after driving a 110% rally in just one week.

Stellar’s price dip in recent hours also coincided with a 4.95% pullback for Bitcoin [BTC], from $123.2k to $117.1k.

Source: Coinalyze

Coinalyze data showed that bullish enthusiasm was still strong in the short-term, and Funding Rates remained positive. The 10.6% price drop was accompanied by a drop of $20 million in Open Interest.

This suggested long liquidations and traders taking profit at the $0.51 resistance zone.

The spot CVD maintained its uptrend, showing that sellers weren’t dominant yet. This suggested that the price pullback might be shallow.

Can XLM bulls resume their upward march?

Source: XLM/USDT on TradingView

Using the rally from the 22nd of June, a set of Fibonacci retracement levels was plotted (white). The market structure shifted bullish on the 6th of July, and high trading volume followed its swift rally to $0.516.

On the way higher, the daily chart presented some gaps. The first was at the $0.42-$0.44 area, which was being retested at the time of writing.

The A/D indicator was trending higher, showing the strong buying volume in recent days. The CMF agreed, its +0.23 reading well above the +0.05 threshold that marks sizeable capital inflow to the market.

The MFI began to recent from the 97.7 value it made on the 14th of July.

Source: XLM/USDT on TradingView

While the 1-day chart showed strength, the 4-hour chart highlighted a bearish divergence. The MFI and the price, marked in orange, diverged to signal that a pullback was imminent.

This pullback saw XLM prices recede to $0.43. The CMF also fell to neutral values.

Overall, the bearish divergence has played out, seeing the XLM price revisit the fair value gap as a demand zone.

A deeper Bitcoin correction below the $116k mark could bring XLM prices lower, but until that happens, traders can maintain their bullish bias for Stellar.

Disclaimer: The information presented does not constitute financial, investment, trading, or other types of advice and is solely the writer’s opinion