Stellar (XLM) Price Momentum: Will the Bullish Trend Persist?

Stellar (XLM) Bullish Setup Faces Headwinds

Stellar (XLM) has seen a modest increase, up 10% in the past week and 3% in the last 24 hours. This follows a breakout from a bullish pattern on the daily chart earlier this month. However, the gains have been slow, raising questions about the strength of the current uptrend.

The key to understanding this lies in the balance between supply and demand, which is evident in both on-chain data and price charts.

Supply Overhang: Exchange Balances at Record Highs

A significant factor is the elevated level of XLM held on exchanges. Over the past year, exchange balances have reached a record 1.03 billion XLM (approximately $469.7 million). High exchange balances indicate a large supply of tokens readily available for selling.

This creates potential selling pressure, limiting upward price movement. Even after a bullish breakout, the large supply overhang may prevent XLM from mirroring the rallies seen in other altcoins.

Demand-Side Resilience: Money Flow Index Shows Buying Interest

Despite the supply-side pressure, buying interest remains. The daily Money Flow Index (MFI) currently sits at 51.32, staying above 50 and recently showing upward momentum after avoiding retesting July lows near 29.

This suggests that while there are sellers, there is still meaningful capital flowing into XLM. Buyers are active enough to prevent significant price declines, but not yet powerful enough to overcome the abundant supply. This dynamic is causing a period of consolidation.

Short-Term Outlook: 4-Hour Chart Shows Fading Momentum

Examining the 4-hour chart provides a closer look at the current market situation. XLM is currently trading within an ascending triangle, a bullish continuation pattern, with key support at $0.44 and resistance levels at $0.46 and $0.47.

However, the Relative Strength Index (RSI) indicates a potential weakening of momentum. The RSI has printed a lower high even as the price has reached a higher high, suggesting short-term exhaustion. Combined with the high exchange balances, this explains why XLM's price remains range-bound despite the bullish formation.

A break above $0.47 could trigger a rally, potentially amplified by the liquidation of short positions at that level. However, a drop below $0.43 would jeopardize the bullish structure, possibly triggering long-side liquidations and further price declines.

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