Stellar Lumens (XLM) Soars: 3 Key Reasons for Potential Reversal

Stellar Lumens (XLM) has made a strong comeback, experiencing three consecutive weeks of growth and reaching its highest price since 2021. As of recent, the price of Stellar Lumens has surged to $0.3052, a notable increase driven by the ongoing cryptocurrency market bull run and a growing fear of missing out (FOMO) among investors.

This surge has coincided with the rise of Ripple (XRP), which recently jumped to $1.5, its highest level since May 31, largely fueled by investor anticipation that the U.S. Securities and Exchange Commission (SEC) might soon conclude its litigation against Ripple Labs. Both Stellar and Ripple share similar goals and histories in disrupting the payment industry, with Ripple aiming to make cross-border institutional payments simpler, and Stellar focusing on enabling peer-to-peer (P2P) transactions.

Additionally, it’s worth noting that Gavin Wood, who co-founded Stellar, was also a co-founder of Ripple. Historically, the price movements of XLM and XRP have often mirrored each other, and with the anticipation of potential Stellar and XRP Exchange-Traded Funds (ETFs) being launched in 2025, investors are watching both projects closely.

Technical Indicators Suggest a Potential Reversal for XLM

While the outlook for Stellar Lumens (XLM) appears bullish in light of the ongoing crypto rally, there are concerns that XLM may face a reversal soon. Three key factors suggest this potential trend shift:

• Mean Reversion Risk
  A critical concept in technical analysis is mean reversion, where the price of an asset tends to return to its historical average over time. Stellar Lumens has surged 142% above its 50-week and 200-week Exponential Moving Averages (EMAs) during this rally. If the market follows the principle of mean reversion, XLM’s price could retreat to these averages, which could mean a decline back toward lower price levels.
• Overbought Conditions
  The Relative Strength Index (RSI) for XLM has surged to 83, indicating that the asset is in overbought territory. An RSI above 70 typically signals that an asset may be overbought and due for a price correction. Additionally, the Stochastic Oscillator lines are nearing the 100 mark, which further suggests that momentum is reaching an extreme level. Historically, such conditions are often followed by sharp declines, signaling the potential for a reversal.
• Break-and-Retest Pattern
  XLM recently broke above the key resistance level at $0.1624, which marked its July 2023 high. In technical analysis, it’s common for assets to retest key support levels after breaking through them before continuing their upward movement. Therefore, XLM may drop back to around $0.1624 to test this level of support before potentially resuming its bullish trend.

While the price of Stellar Lumens (XLM) continues to enjoy significant gains amid the broader cryptocurrency bull market, technical indicators suggest a potential reversal could occur in the near future. Mean reversion, overbought conditions, and the possibility of a break-and-retest pattern all point toward the likelihood of a short-term pullback before the coin resumes its upward movement. Investors should keep a close eye on these technical developments, as they may provide key insights into the future price direction of XLM.