On Nov.4 Stellar Lumens announced the completion of a 50% token burn of their total supply. This led to the destruction of 55 billion (XLM) tokens and the Stellar Development Foundation explained that the token burn was designed to provoke efficiency within the Stellar ecosystem.

Crypto market data daily view. Source: Coin360

The price of XLM surged 25% after the announcement this triggered the market to become bullish on the altcoin. Given that a growing number of altcoins are beginning to produce noticeable returns, an analysis of the technical aspects of XLM is warranted.

XLM has completed a full retrace

XLM USD weekly chart. Source: TradingView

The weekly timeframe shows a full retrace since December 2017s high of $1.10 to the May 2017 high at $0.05. Over the past few months, the current level has held as support and the area (ribbon on the daily chart) appears to be a springboard that will support XLM’s upward movements.

However, the altcoin is still in a 23-month downturn since the 2017 peak. In order to conclude that this XLM is moving out of its downtrend the altcoin first has to break the 23-month downtrend to the upside and start creating higher highs and higher lows on higher time frames. This would signal that the situation is starting to fundamentally shift, as can be seen on the smaller time frames.

XLM reaches a new trading volume all-time high

XLM USD daily chart. Source: TradingView

As XLM surged, the daily candle printed an all-time high volume candle on Bitfinex. This caused the price to break through an important resistance at $0.07 and the price immediately pushed further into the range-high at $0.09.

In order to have a sustainable continuation on the upward trend, a retest should occur at the $0.073 area in order to confirm the support/resistance flip of this zone.

XLM USD daily chart. Source: TradingView

The daily chart shows that XLM broke back into the range as the price moved above $0.07. In order to be able to sustain upwards momentum a clear support flip of the green zone around $0.07 is needed for a trend shift towards the range high.

The range high can be found at $0.13 on the daily timeframe and if XLM is strong enough to rally towards $0.13, the downtrend on the weekly timeframe will be breached for the first time in 23 months.

Similar signals show on previous XLM bottoms

XLM BTC daily chart. Source: TradingView

Not only has a full retrace been seen on the XLM/USD pair, but the same price action has also been seen on the BTC pair. This is clearly demonstrated in the daily chart above. During the 2017 mania, a few high volume price spikes took place on XLM but these spikes always retraced to levels below 800 satoshis (sats).

Since the peak high of January 2018, the trend has been down for the XLM/BTC pair which finally retraced to a support level around 0.00000550 (sats). This area was previously a resistance during 2016 and marked a bottom during the last few months.

Traders will want to know why the daily chart suggests that a bottom has been found. The answer can be found in the bullish divergences that are clearly shown on the higher time frames. Quite often bullish divergences mark a bottom on a certain asset in the same bearish divergences can be indicators of price tops. From July to September 2019 a falling wedge construction was built and a few bullish divergences developed. This also marked the bottom during previous cycle lows in July - September of 2017.

After the bullish divergence and falling wedge construction was confirmed, the price of XLM skyrocketed with an increase of 2,200%.

It’s yet to be seen whether XLM has the same strength as it did in the previous market conditions, however, the similarities are the bullish divergences and falling wedge pattern. If continuation can be followed, the first resistance on the weekly time frame can be found near the 1500 sats area, which lines up with the resistance around $0.13 (almost 2x from here).

Range high needs clearance before continuation can occur

XLM BTC 4-hour chart. Source: TradingView

On the smaller time frames, a range can be defined in which the area around 900 sats is acting as resistance, while constant higher lows are constructed since the beginning of September. The recent price movements pushed XLM to the range highs, however, it was not able to break through the upside.

On the smaller time frames, a bullish flag construction was made prior to the breakout.

XLM BTC 4-hour chart. Source: TradingView

Given that XLM is not able to clear the upper resistance at this point, this leaves the impression that the coin needs some more support tests before a clear breakout is likely to occur. In that regard, the first potential area for support can be found through the horizontal level around 810-820 sats.

If XLM is able to hold that level for support and the altcoin can move towards the resistance again, it’s likely to see a breakout to the upside in which the levels of 1230-1250 and 1500-1550 sats are potential resistances zones.

XLM BTC 4-hour chart. Source: TradingView

If XLM is not able to breakthrough and falls below 810-815 sats, it’s likely to retest the 750 sats and potentially the 700 sats area again. This scenario is less likely due to the bullish structure created on the higher time frames.

Special note for Ripple (XRP)

XRP USD 6-hour chart. Source: TradingView

Within the cryptocurrency market, groups of coins tend to move together and one of these groups can be found through XLM and XRP. Given that XLM is showing potential bottoming signals, traders might keep an eye on XRP as well.

Interestingly, the technical and fundamental analysis are lining up together for potential movements. The Swell conference is also approaching and the event could potentially bring news and volatility to the markets at the same time that XRP price seems to be lining up for a breakout move.

From a technical perspective, XRP/USDT is hovering around $0.305, which is an important horizontal resistance level. Clearing this area opens the door to a potential rally to $0.36.

The views and opinions expressed here are solely those of the author and do not necessarily reflect the views of Cointelegraph. Every investment and trading move involves risk. You should conduct your own research when making a decision.