Stellar [XLM] aggressive traders can take advantage of the breakout of this pattern

Disclaimer: The conclusions of the following analysis are the sole opinions of the author and should not be taken as investment advice.

Stellar [XLM], at press time, consolidated as it watched a fierce clash between buyers and sellers near the checkpoint (POC, red). Recent drawdowns have resulted in a bearish pennant on XLM’s daily timeframe.

Any close below the pennant could pave the way for a decline in the coming sessions. The bulls needed to inflict a slight uptick in buying volumes to invalidate the current downtrends.

At the time of writing, XLM was trading at $0.11233, down 2.57% in the last 24 hours.

XLM Daily Chart

Source: TradingView, XLM/USD

This bearish pull from $0.2 marked 3-month trendline resistance (white, dotted) on its daily chart. The alt lost over 58% (from its April highs) and hit a 19-month low on June 18.

This trendline resistance has tightened most of the rally over the past few months. As a result, the recent breakout of the bullish channel has transposed into a bearish pennant. As a result, XLM fell below the 20 EMA (red) and exhibited a bearish edge.

If the bears continued to increase their pressure, they would aim to break under the pennant. A close below this level could expose XLM to decline towards the $0.1019 area.

Should buyers find renewed pressure, immediate trendline resistance could undermine buying efforts. Additionally, with the short-term EMAs looking south, sellers have reiterated their edge in the current momentum.

Reasoning

Source: TradingView, XLM/USD

The RSI has taken a bearish stance for the past few days. The 42-level resistance has bogged down short-term buying efforts on the chart.

Additionally, the OBV’s higher spikes over the past week marked a bearish divergence with the price action. This reading pairs well with the ongoing bearish outlook.

Conclusion

Given the current bearish pennant pattern approaching the south-facing 20 EMA, XLM could see a potential decline. A break below the pattern could expose the alt to 9% downside risk.

However, investors/traders should consider the general market sentiment and on-chain developments to make a profitable decision. This activity would be imperative to minimize the risk of any bearish invalidation.