XLM price penetrates trendline in possible bear trap, but Stellar will recover

• Stellar price is testing the green ascending trend line that acted as backbone for the uptrend since the beginning of October.
• XLM price looks to be making a false breakout, a bear trap, that could see large buy-side volume resulting in a bullish recovery and breakout.
• Expect a quick break above $0.41 towards $0.46.

Since the beginning of October, the Stellar (XLM) price has been in an uptrend, with a well-defined green ascending trend line acting as the backbone. This trend line is being broken today, in what looks like a bear trap. This should result in bulls quickly using the opportunity to overhaul bears and make a breakout trade up to $0.46. As bulls finally have broken out of the bandwidth since mid-June, expect more upside potential to follow.

XLM price to recover as uptick in volume washes out any bearishness

A break to the downside looks to be unfolding, but with global market sentiment still in check and favorable tailwinds still present, this instead looks like a bear trap ready to offer bulls an entry for a recovery move followed by a future break out from the consolidation.

XLM price should see volume on the buy-side pick up throughout the day and wash out any bearishness that could put the uptrend under pressure. Expect a massive uptick in buy-volume and then a breakout to unfold towards $0.46. XLM price will likely be rejected at first but will find support at $0.41, where new buyers will come in and push XLM price up for another leg towards $0.51.

XLM/USD daily chart

The bull-trap thesis would only be invalidated if bears can push price action below the $0.35 low of October 21, in which case  expect a pickup in selling volume with a nosedive in XLM price action as a result. Although bears face the 55-day Simple Moving Average (SMA) and the monthly pivot around $0.33, expect selling to continue until $0.30. With the double barrier at $0.30 and $0.29, however, bears will face quite some resistance from bulls that will want to keep the uptrend in place.

 

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