While most eyes are focused on bitcoin and some of the higher market cap coins, one large player — Stellar’s lumens (XLM) — has quietly broken through very significant support, and it looks to be the beginning of a very large move to the downside:
Figure 1: XLM-BTC, Weekly Candles, Broken Support
The red line above illustrates the long-held support that is now broken. On the weekly scale, we can see a clear close below the support level as we continue to march to lower lows. While we haven’t technically established a lower low, it’s important to note that a fresh close below the weekly support demonstrates an overall lack of demand and a still very heavy presence of supply in the market.
One of the consequences of 2017’s parabolic rise is that the market never truly got a chance to establish firm support — which now puts the XLM-BTC market in a very precarious position:
Figure 2: XLM-BTC, Weekly Candles, Next Level of Support
Below us, a staggering 65 percent move sits between the current price and the next level of support down in the 750 satoshi range. The weekly candle still has several days left in it, and the price is already accelerating with a widening spread and growing supply:
Figure 3: XLM-BTC, Daily Candles, Widening Spread and Volume
When we look more closely at the daily candles, we can see high volume and widening spread as the market easily slipped right through support without much of a fight from the bulls. This type of move is considered to be a “low effort, high result” move and is typically an indication of bullish capitulation. As we begin to push lower and lower, the price will likely begin to accelerate due to the lack of support below us on the weekly time frames. Below us, on the monthly candles, there is a potential for an untested support level in the 1,500 satoshis range to hold:
Figure 4: XLM-BTC, Monthly Candles, Untested Support
Untested support is often unreliable as it can’t actually be considered support until it has been tested. However, this may be a point of interest for eager bulls in the coming weeks.
It’s important to note that these support levels exist on very high time frames, so we could very easily see chop on the low time frames in the interim. While it is possible to see demand step in, it seems highly unlikely. Breaking major support like this is typically a sign that we are in the beginning stages of a major macro move.