Our July 10 trade recommendation for Stellar (XLM/USD) hit its target on July 17 when it went as high as $0.2564. Those who followed the trade suggestion grew their investments by over 40% in one week.
While Stellar overshot our target price and climbed as high as $0.352 on July 25, we were satisfied not to chase the rally. At that point, the market was trading in overbought territory. In addition, it was flashing a bearish divergence. We’re happy to wait for the dip to get our next chance to buy. It looks like that opportunity is presenting itself.
Technical analysis shows that XLM/USD is poised to breach resistance of $0.255. This would trigger the breakout from the large symmetrical triangle on the daily chart. Stellar has been trading inside this pattern since May 2018. A clear breakout should generate a lot of bullish momentum.
Also, the daily RSI is in great shape. It just bounced off support of 37 after flashing overbought readings on September 23. This tells us that the RSI has cooled off so it has the room to accommodate a monster rally.
Last, we’ve been hearing rumors that Coinbase might potentially add Stellar to its exchange. This type of development could help ignite a breakout.
The strategy is to buy the breakout at $0.255 after the market generates volume of at least 2.5 million Stellar units. The market is up against a long-term resistance area. In other words, you can expect heavy selling at $0.255. Stellar needs buyers to alleviate the selling pressure.
Once breakout is complete, the market will likely have the momentum to rally to our target of $0.35 first and then $0.45. The process may take more than a month.
Daily Chart of Stellar/US Dollar on Bitfinex
As of this writing, the Stellar/US Dollar pair is trading at $0.24958 on Bitfinex.
Summary of Strategy
Buy: Breakout at $0.255 after volume of 2.5 million Stellar units.
Target: $0.35 first and then $0.45.
Stop: $0.24 after the breakout.
Disclaimer: The writer owns bitcoin, Ethereum and other cryptocurrencies. He holds investment positions in the coins, but does not engage in short-term or day-trading.
Featured image courtesy of Shutterstock.