Stellar (XLM) Averts Another Fall But Lacks A Clear Direction Short Term

Stellar Lumens (XLM) seems to have averted another fall for now as the technicals enter oversold territory. The price has now seen a bounce back above a trend line support as the bulls come to its rescue. However, it is still too early to declare victory. The RSI has found support temporarily but the price might be due for another drop yet. That being said, it is unlikely to break out of the pitchfork anytime soon. Even if XLM/USD remains above its current price, it is unlikely to rally aggressively till the beginning of next week. We have seen Stellar (XLM) correct same as the rest of the cryptocurrencies the past few days. Its correlation with Ripple (XRP) was short lived and the price soon began to mimic the trajectory of Bitcoin (BTC).

The pattern formed within the pitchfork on the XLM/USD chart was originally deemed to be a cup and handle. It began forming the cup between November 26 and November 28. Between November 28 and November 29, it had formed the handle, but somehow it did not translate into a rally. Soon after the big cup and handle was completed, another attempt was made to form a small cup and handle between November 29 and November 30 as seen on the chart. This pattern also did not come to fruition as expected and soon afterwards, the price started to fall after retesting top of the ascending channel again. A lot of people feel worried how many a time cryptocurrencies do not abide by traditional market patterns. However, it is pertinent to note that there are usually multiple patterns at play and hence multiple interpretations.

As the XLM/USD cup and handle pattern shows, the only point of highlighting patterns and sequences on a chart is to explore possibilities and assess probabilities. It does not mean that a certain pattern will always be followed just because it has been followed in the past. It would thus be very unreasonable to open an XLM/USD buy position with the hopes that the price is going to go up because a cup and handle pattern is at play. It should be considered as one of the arguments in support of a bullish bias but it should not form the basis for a buy position on its own.  This also leads to a more important question which is, “Are you trading or investing?” Stellar Lumens (XLM) is a wonderful project but investing in it long term is not the same as trading it short term. Both require different strategies and research.

The daily chart for XLM/USD explains perfectly why investing in XLM/USD and trading it is not the same and requires different approaches. If you were investing in XLM/USD, you would be comfortable beginning to accumulate around September. If the price went down short term, you would only have taken it as an opportunity to buy more. This also means that if the price were to drop short term, you would have nothing to worry about. In fact, you would be happy to accumulate more. On the other hand, if you were trading, you would be buying and selling the big swings since the beginning of the correction. You start at the beginning of the correction and you see a trend line that the price has respect thus far.

 However, if the market were to act irrationally which it does, quite often, you should be able to deal with it. If you look at the fall below the support this month on the above chart, you can see that the fall was very aggressive because a lot of people were not prepared for it. This means that either most of them got stopped out and liquidated because they did not understand the difference between trading and investing or they panic sold because of the very same reason. Investing in XLM/USD might seem easier than trading as you would have to just hold a bunch of tokens, but the reality is different. With trading, the fundamentals of what you are buying and selling does not matter much because you are not holding the asset for a long time. However, when you are investing, you are putting your faith in a project for 5 or 10 years which means you will have to do a lot more work to make the right decisions.