An analyst stated that if the price of XLM falls below a key support level, a strong bearish reversal may occur. This trend would erase part of the nearly 500% increase over the past 30 days.
Analyst: XLM price may correct
Stellar has performed strongly this year, soaring to a high of 0.6345 USD, the highest level since May 2021. At its peak, it has risen more than 743% from this year's low.
Most analysts are optimistic about the price of Stellar due to its strong fundamentals and technicals. In an article, Rose Premium predicts that Stellar will surge to 0.98 USD, just a few points below the psychological barrier of 1 USD. If this happens, it would mean a 90% upside potential from the current level.
However, analysts warn that if the price of XLM falls below 0.40 USD, its downside potential will further expand. If this happens, he expects the price of XLM to drop to 0.3235 USD, a decline of 35% from the current level.
Stellar Price Analysis: Mean Reversion is a Key Risk
The weekly chart shows that the price of the XLM token has risen parabolically for four consecutive weeks. There are signs that it is forming a bullish triangle flag pattern, which is a popular continuation signal. This pattern consists of a long vertical line and a symmetrical triangle, usually resulting in a bullish breakout.
If the price of Stellar (XLM) breaks above the 0.6355 USD level in the triangle flag, it will confirm more upward space. If this happens, as we predicted this week, it will increase the likelihood of the token breaking its historical high of 0.7960 USD, followed by breaking the psychological barrier of 1 USD.
However, the risk is that the token has formed a hanging man pattern. This pattern is characterized by a long lower shadow and a small body, typically forming at the top of a trend. During most periods, this hanging man leads to a downside breakout, especially when the price falls below the lower side.
Another risk for the price of Stellar is that it may experience mean reversion. This is a situation where an asset reverts to its average price. In this case, it is still well above the 50-week moving average of 0.1567 USD and the 200-week moving average of 1.448 USD. Such a decline would mean a drop of nearly 70% from the current level.