Stellar price has dived in the past few weeks, erasing some of the gains it made in November when it surged by almost 500%. The XLM token plunged to a low of $0.35, down by almost 50% from its November highs. This article explores why Stellar Lumens is on the verge of a strong surge in January.
Stellar price analysis: Falling wedge as a catalyst
The Stellar price is on the verge of a strong bullish breakout in January, mainly because the token has formed a falling wedge pattern. This pattern started forming in December when it was trading at $0.600. The upper side of the wedge connects the highest swings on Dec. 2, 17, and 24.
On the other hand, the lower side of the wedge links the lowest swings on Dec 3, 9, and 20th. These two lines are now about to converge, which will likely lead to a strong bullish breakout in the next few weeks. If this happens, the initial level to watch will be at the psychological point of $0.500, which is about 50% above the current level.
This rebound will likely happen when the XLM price drops and bottoms at $0.2970, the 61.8% Fibonacci Retracement level. It will reach that point as the Relative Strength Index (RSI) moves to the oversold level at 30.
More catalysts for the XLM price
There are other potential catalysts that will push the XLM price higher in January. First, as shown below, the token’s futures interest has been in a strong downtrend in the past few weeks. It has fallen from the year-to-date high of $335 million in November to the current $132 million.
In most cases, falling futures open interest is usually a sign that the crowd is losing interest in an asset. This performance usually leads to potential surges. For example, Stellar had a futures interest of less than $40 million before the recent surge.
Second, the Stellar price may surge in the coming weeks because of Ripple. As we wrote in this XRP price prediction, the coin is slowly forming a bullish pennant pattern, which may lead to more gains in the coming weeks. This is notable since Stellar tends to correlate closely with Ripple since the two are seen as cousins.
Further, the XLM price may recover because of the seasonality of the crypto industry, where most tokens do well in the first quarter of the year.
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