The broader cryptocurrency market is showing signs of a steady rebound following a period of sharp volatility last week. This recovery has seen Ethereum (ETH) bounce back above the $3,000 mark after dipping to $2,622. The improving market sentiment is now providing a boost to several altcoins, including Stellar (XLM), which is regaining momentum.
While XLM is currently trading with modest gains, a significant technical formation on its chart suggests that a more substantial price movement could be developing in the near future.
Inverse Head and Shoulders Pattern in Play
In recent weeks, XLM has developed a distinct inverse head and shoulders structure. This pattern is widely recognized in technical analysis as a strong indicator of a bullish reversal.
The pattern began with the formation of the left shoulder earlier this month. This was followed by a significant price drop, reaching a low of $0.2260, which formed the head. The subsequent recovery from the right shoulder, which occurred at $0.2433, has now pushed XLM back towards the neckline resistance zone, currently situated at $0.2578.
The neckline, identified at $0.2615, has been tested on multiple occasions, but buyers have not yet achieved a decisive breakout above this level. This resistance area also coincides with a supply block that has effectively capped XLM's price for approximately two weeks. A confirmed close above this neckline would validate the inverse head and shoulders pattern and is likely to accelerate bullish momentum.
The combination of this tightening price structure, the development of higher lows, and renewed buying interest strongly suggests that XLM may be on the verge of an imminent breakout attempt.
What’s Ahead for XLM?
Should XLM successfully breach the neckline resistance at $0.2615, the measured move indicated by the inverse head and shoulders pattern projects a technical target of $0.3053. Such a breakout would signify an approximate 18% upside from the breakout level and could signal the commencement of a broader trend reversal for the cryptocurrency.
Conversely, if XLM is unable to break through the neckline on its next attempt, the price might experience a pullback. The potential support region to watch in this scenario is between $0.249 and $0.243. This zone, formed by the demand established during the right shoulder's formation, will be critical for bulls to defend. A failure to hold this support level could weaken the overall bullish structure and potentially delay any upward price momentum.
At present, the market's focus remains intently on whether XLM can muster the necessary strength to break through the neckline resistance and initiate a new upward price trajectory.