Stellar Lumens (XLM) has been on a remarkable run in recent weeks, surging nearly 500%. However, a prominent analyst warns that a significant price correction could be on the horizon if the cryptocurrency fails to maintain its upward momentum.
Bullish Sentiment Prevails
Stellar has garnered widespread bullish sentiment due to its strong fundamentals and technical indicators. Many analysts, including Rose Premium, anticipate further gains, with some predicting a potential surge to $0.98 or even $1.
$XLM/USDT
— Rose Premium Signals 🌹 (@VipRoseTr) December 3, 2024
A bounce from the $0.4202 support zone could lead to a rally toward $0.6864, with further potential to reach $0.8208 and $0.9815 as bullish momentum strengthens.
Failure to hold the $0.4000 support could invalidate the bullish scenario and lead to further downside.… pic.twitter.com/7XUNha1RpH
A Potential Bearish Turn
Despite the optimistic outlook, the analyst cautions that a drop below the critical support level of $0.40 could trigger a sharp downward correction. Such a move could potentially drive the XLM price down to $0.3235, representing a 35% decline from current levels.
Technical Analysis: A Double-Edged Sword
A closer look at the weekly chart reveals a parabolic surge in the XLM price over the past four weeks. While the formation of a bullish pennant pattern suggests continued upward momentum, the emergence of a hanging man candlestick pattern raises concerns. This bearish indicator often signals a potential downward reversal, especially when the price breaks below the lower side of the pennant.
Additionally, the significant divergence between the current price and the 50-week and 200-week moving averages hints at a potential mean reversion. If such a correction occurs, it could lead to a substantial decline of nearly 70% from the current price.
While Stellar‘s recent performance has been impressive, it’s crucial for investors to exercise caution and consider the potential risks. The cryptocurrency market is highly volatile, and sudden price swings can occur without warning. As such, it is advisable to conduct thorough research and consult with financial advisors before making any investment decisions.
Disclaimer: The information in this article is for general purposes only and does not constitute financial advice. The author’s views are personal and may not reflect the views of Chain Affairs. Before making any investment decisions, you should always conduct your own research. Chain Affairs is not responsible for any financial losses.
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