Since May of last year, Stellar (XLM) observed a steady downtrend while it marked lower peaks while maintaining the 13-month-long support at the $0.195-mark.

Considering the bullish comeback over the last month and the rejection of lower prices, a likely close above the $0.2217-mark would propel a test at the upper trendline of the down-channel that coincided with the 50 EMA (cyan). At press time, XLM traded at $0.2195.

XLM Daily Chart

Source: TradingView, XLM/USD

Ever since XLM struck its three-year high on 16 May 2021, it steeply turned downward and traded between the $0.19-$0.39 range for over eight months now. The recent bearish phase marked a down-channel (white) on its daily chart as the alt lost nearly 62% (from 10 November) and hit its one-year low on 22 January.

During this phase, the 50 EMA stood as a sturdy resistance and confirmed the long-term downtrend. The fall halted at its 13-month ($0.19) support, where the buyers stepped in to initiate a 29% recovery and test the upper trendline of the down-channel on 8 February. Interestingly, a trend reversal occurred when the bears approached the $0.19-support in July 2021.

Now, it seemed likely for the history to repeat while XLM saw a morning star Candlestick pattern, and the technical indicators confirmed the increasing buying strength. Moreover, the recent bullish comeback formed a strong demand zone (rectangle) near the $0.2-level.

Any close above the $0.221-mark would likely lead to a test of around the $0.23-mark before pulling back. Should the bulls fail to close above $0.221, a direct retest of the demand zone should not surprise the investors/traders.

Rationale

Source: TradingView, XLM/USD

The RSI was in an uptrend over the last month but still needed to close