XLM (Stellar) Price Prediction: Bearish Head and Shoulders Pattern Could Lead to 30% Drop

Stellar (XLM), the native token of the Stellar network and a competitor to XRP, is currently at a pivotal point. The asset has been showing signs of weakness

Stellar (XLM), the native token of the Stellar network and a competitor to XRP, is currently at a pivotal point as its price hovers above crucial support. However, ongoing bearish sentiment and declining market momentum suggest that the token could be heading for a significant drop.

After forming a bearish head and shoulders pattern on the four-hour timeframe, a classic signal that a downtrend could be unfolding, Stellar’s price is now testing the neckline support of this pattern.

If XLM manages to break below this neckline and close a four-hour candle under $0.265, historical price trends suggest that the token could drop as much as 30%, setting a target around $0.19.

On the other hand, if buyers can keep the price above the neckline and push it back above the 50% Fibonacci retracement level at $0.285, it could stall the bearish setup and set the stage for a short-term recovery.

Key Levels to Watch

At present, XLM is trading at $0.275, indicating a loss of over 4.5% in the last 24 hours.

Adding to the bearish narrative, trading volume has decreased by 35%, showing that traders are participating less at these levels. This lack of interest could make it easier for the asset to continue moving down.

On-chain data from Coin glass reveals that traders have taken over-leveraged positions around key levels. At the lower end, $0.27 is acting as a strong support zone, where traders who went short at $0.285 might place stops.

On the upper side, $0.285 is emerging as a crucial resistance level, as a break above this point could open the way for further gains.

Key Observations from On-Chain Data:

Over-leveraged positions are evident at $0.27, indicating strong support in this zone.

As traders unwind their leveraged positions, we can expect increased volatility.

At the upper level, $0.285 is acting as a resistance zone, where leveraged traders might place their take-profit orders.

What’s Next for XLM

In the final analysis, XLM’s fate rests on whether it can stay above the crucial support at $0.265. If the bears manage to push the price below this level, it could open the door for a sharp 30% drop toward $0.19.

However, if the bulls can defend this support and push the price back above $0.285, it could trigger a short-term relief rally, invalidating the bearish setup.