3 Reasons XLM May Turn Around Soon

Stellar Lumens continued its strong comeback, rising for three consecutive weeks and reaching its highest level since 2021.

Stellar (XLM) price jumped to $0.3052, driven by the ongoing cryptocurrency bull run and the fear of missing out.

Its rise has coincided with the ongoing Ripple price rise causing Ripple to jump to $1.5, the highest level since May 31. This rally is attributed to investors’ anticipation that the Securities and Exchange Commission will end its lawsuit against Ripple Labs.

Ripple and Stellar have two important similarities. Both were designed to disrupt the payments industry. Ripple aims to help institutions send money globally in an easier way, while Stellar’s goal is to facilitate peer-to-peer payments.

In addition, Gavin Wood, who founded Stellar, was one of the co-founders of Ripple. Historically, XLM and Ripple (XRP) have moved in sync with each other. Investors also expect some companies to file for a Stellar and XRP ETF in 2025.

Technicals point to a reversal of Stellar Lumens

The outlook for XLM price is bullish during the ongoing crypto rally. However, there is a risk of a hard turn in the next few days.

First, the Stellar price may fall due to mean reversion, a concept where assets often return to their historical averages. In XLM’s case, the price has jumped 142% above the 50-week and 200-week exponential moving averages during the rally.

Therefore, if mean reversion occurs, there is a risk that the coin will fall closer to these averages.

Second, the XLM price may reverse sharply because it has become extremely overbought. The Relative Strength Index has jumped to 83, while the two lines of the Stochastic Oscillator are approaching 100. Rising oscillators indicate momentum, but such moves often precede sharp declines.

Third, the Stellar price may reverse to form a break-and-retest pattern. It rose above the key resistance level of $0.1624 – its July 2023 high – last week. In most cases, financial assets test key support levels before resuming a bullish trend. Therefore, XLM is likely to fall to $0.1624 before resuming its upward movement.