XLM price tapped the lower trend line of an ascending parallel channel during the recent crash.
A continuation of the bounce from this level shows the promise of a 200% bull rally to $1.42, a new all-time high.
Stellar could start a new downtrend if the lower range of the demand zone at $0.40 is shattered.
XLM price rally and the latest crash seem to be respecting a technical pattern that has contained it for nearly five months. Now, a retest of the lower boundary could signal the start of a new upswing.
XLM price eyes new highs
XLM price action since late November 2020 has been contained in an ascending parallel channel. This setup is formed when Stellar’s higher highs and higher lows are connected using trend lines.
The recent market crash caused XLM to shed 27% of its market value. However, the crash found support at the lower trend line of the channel and shows healthy buying activity, which suggests a continuation of this upward trajectory.
The last two times Stellar tapped the channel’s lower boundary, a humungous bull run followed. Hence, if something similar were to happen, XLM price can head toward the 127.2% Fibonacci extension level at $1.42, a new all-time high.
However, investors should wait for a retest of the 50 Simple Moving Average (SMA) on the 1-day chart. During the uptrend, the buyers will face stiff resistance around the supply zone that ranges from $0.58 to $0.69. Hence, clearing these levels will provide a secondary confirmation for the bullish outlook.
Regardless of the accumulation, if sellers overwhelm the buying pressure leading to a decisive close below the lower boundary of the demand zone at $0.40, it would invalidate the bullish outlook.
If XLM price trades below this zone for an extended period, a 13% correction to $0.34 seems likely.
