With the confirmation of a death cross, a technical pattern in which the 50-day moving average crosses below the 200-day moving average, Stellar has entered bearish territory. This pattern usually denotes a protracted downward trend and declining investor confidence. This may not be as straightforward as it first appears, though. XLM has lost more than 3% in the past day, continuing its monthlong downward trend, and is currently trading at about $0.234.
The asset’s failure to acquire bullish momentum since its peak in early December 2024 is reflected in the death cross, which was only recently formed. The declining momentum is supported, at least from a classical technical standpoint, by the 50-day and 200-day moving averages, which slope downward. Despite the bearish crossover, there are preliminary indications that this death cross might not be accurate. The Relative Strength Index (RSI) is approaching oversold territory, currently hovering around 38.
This implies that there may be space for a short-term technical rebound because the selling pressure may be overextended at the moment. Furthermore, a complete capitulation event is not always consistent with volume patterns. Although there has been a slight increase in trading activity during the recent sell-off, it is not the extremes that are usually associated with significant trend reversals.
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This creates the possibility of a fake-out situation in which the death cross triggers panic-selling, which is followed by a dramatic rebound. XLM would need to recover important resistance levels, especially $0.26 and $0.28, where the 50-day and 200-day moving averages are currently located, in order to refute the bearish thesis. The death cross would become a bear trap if there were a breakout above these, which would indicate fresh bullish momentum.
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Stellar’s death cross is undoubtedly a warning sign, but traders should exercise caution to avoid going overboard. Given that momentum is stabilizing and indicators are getting close to oversold levels, the next few days could reveal XLM’s actual direction, which might not be downward.