Stellar (XLM) under test: Can the upward momentum hold amidst the wave of sell-offs?

Stellar (XLM) is quietly advancing, recording a 10% increase over the past week and an additional 3% in just the last 24 hours. However, this upward momentum is still not enough to be called a breakdown. Notably, this development occurs even after the token has broken a bullish pattern on the daily chart earlier this month.

If the technical structure remains bullish, why hasn't the price been able to break out strongly? The answer lies in the fierce tug-of-war between buying and selling forces, which is occurring simultaneously on both on-chain data and price charts.

Supply pressure: Exchange balance reaches a record level

The first signal comes from the amount of XLM on exchanges. In just one year, this number has climbed to a record high of 1.03 billion XLM (, equivalent to approximately 469.7 million USD). Specifically, during the period from July to August, the balance maintained at 1.02 billion XLM, placing it among the highest in history.

The Stellar balance on CEX continues to increase | Source: Stellar ExpertIn fact, a large amount of tokens on the exchange means that the supply is readily available for traders to offload at any time. This inadvertently creates a "price ceiling": whenever the price rises, there is a high likelihood that the market will face a wave of profit-taking. This supply pressure may be the reason why XLM, despite having broken down from the bullish pattern, still has not been able to break out strongly like many other altcoins.

Buying power strikes back: The Money Flow Index is trending upwards

Contrary to the overwhelming supply picture, buying pressure in the market has not completely disappeared. On the daily frame, the Money Flow Index (MFI) – a measure of cash flow that combines both price movement and volume – is maintaining above the 50 threshold, at 51.32. Notably, the MFI has just rebounded after avoiding a retest of the July low around the 29 mark.

The Money Flow Index (MFI) of XLM | Source: TradingViewThis indicates that, despite the selling pressure still "lurking", a significant amount of capital continues to flow into XLM. Buyers are strong enough to keep the price from plummeting, but not strong enough to overpower the massive supply. This tug-of-war is putting the market in a state of "compression" and waiting for the moment of explosion.

Zoom In: The 4-hour XLM price chart shows a bullish structure but weakening momentum.

To determine whether the tug-of-war between the bulls and bears is about to come to an end, it is necessary to closely monitor the 4-hour chart. In this timeframe, XLM is moving within an ascending triangle pattern – a setup that often signals a continuation of the bullish trend, with a key support area at $0.44, while the resistance levels are at $0.46 and $0.47.

However, the market momentum is showing signs of weakening. The RSI index on the 4-hour chart has created a lower peak even as prices reached a higher peak, indicating that buying pressure is temporarily losing steam. Combined with the large volume of XLM still sitting on the exchange, this explains why Stellar continues to be "trapped" in a narrow range, despite the technical structure still leaning towards a bullish trend.

The XLM/USDT chart on the 4-hour timeframe | Source: TradingViewIf the price breaks down and closes the candle above $0.47, XLM could reach new highs while completing the breakout pattern. Notably, this price range also coincides with an area that has a high concentration of short orders at risk of being liquidated. Sweeping out these short positions could trigger a "cascading rally" – a powerful chain reaction increase.

On the contrary, if the price adjusts and breaks down $0.43, the bullish structure will be severely threatened. At that point, even buy positions placed around $0.43 and lower are at risk of being liquidated.

SN_Nour