Stellar (XLM) has recently maintained a strong uptrend, but it may be time for the market to undergo a slight correction.
According to analysts, the increase of over 110% in just one week may have exhausted the XLM bulls. Notably, XLM's recent drop coincided with a 4.95% correction of Bitcoin (BTC), from $123,200 down to $117,100.
Data from Coinalyze shows that short-term optimism remains quite strong, with the Funding rate maintaining a positive level. However, the 10.6% price drop has led to a decrease of $20 million in Open Interest (OI) – reflecting long liquidation and profit-taking at the resistance area of $0.51.
The spot CVD indicator continues to maintain an uptrend, indicating that selling pressure has not taken over. This suggests that this correction may not be too deep.
Can the bulls maintain the uptrend of XLM?
Based on the increase from June 22, a set of Fibonacci retracement levels is represented by the white line. The market structure shifted to a clear uptrend from July 6, accompanied by large trading volumes as prices quickly climbed to $0.516.
During the uptrend, the daily chart shows several 'fair value gaps'. The first area is around $0.42–$0.44 and is currently being retested at the time of writing.
The A/D indicator continues to maintain an uptrend, indicating strong buying volume in recent days. The CMF indicator also reinforces this trend with a level of +0.23 – far exceeding the +0.05 threshold, confirming a significant influx of capital into the market.
However, the MFI indicator has begun to retreat from the overbought zone (97.7) established on July 14.
Although the 1-day timeframe has issued a strong signal, the 4-hour chart shows bearish divergence. Specifically, the MFI indicator and price action (marked in orange) indicate a clear correction signal.
This correction has pulled the price of XLM down to $0.43. At the same time, the CMF indicator has also fallen to neutral territory. Overall, the bearish divergence has been 'resolved' as XLM returned to the 'fair value gap' area – which now plays a crucial demand role.
If BTC adjusts further and loses the $116,000 mark, XLM may continue to decline. However, until that happens, buyers can still maintain a positive outlook for Stellar.
