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Stellar (XLM) is currently trading at $0.39, down 3% on the day and 4% over the past week. Despite the pullback, analysts are closely watching technical signals that hint at a potential breakout toward the elusive $1 milestone, provided key support levels hold.
Inverse Head and Shoulders Points to Trend Reversal
One of the most widely followed bullish signals forming on the Stellar chart is the inverse head and shoulders (H&S) pattern. According to crypto analyst Ali Martinez, the token is completing its final dip before a possible breakout:
“Stellar $XLM still needs one more dip before the breakout to $1,” Martinez explained.
The pattern has been developing throughout 2025:
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The left shoulder formed earlier this year.
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The head took shape during May and June.
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The right shoulder has been forming through August.
Support currently sits around $0.36, which aligns with the 0.618 Fibonacci retracement level. A slight pullback into this zone could finalize the structure before buyers step in.
If the neckline at $0.50 is broken, Fibonacci projections point to targets at $0.62, $0.82, $0.94, and even $1.10. On the downside, failure to hold $0.36 could push XLM lower toward $0.33 support.
Indicators Show Neutral but Stabilizing Momentum
Momentum indicators reflect a neutral-to-cautious market. The Relative Strength Index (RSI) sits at 44, slightly below the neutral level of 50. While this shows some weakness, it is not oversold. A dip toward 30 would signal stronger selling pressure, while a climb above 50 could mark a bullish shift.
The Moving Average Convergence Divergence (MACD) offers a mixed picture. The MACD line sits at -0.0035, slightly above the signal line at -0.0051, with a histogram reading of 0.0016. These near-zero values suggest consolidation. If the MACD completes an upward cross, bearish momentum could fade, opening the door for an upside move.
Overall, while indicators are not yet flashing strong buy signals, they show conditions are stabilizing, which supports the bullish chart pattern.
Falling Trading Activity and Short Pressure
Market data adds further context to XLM’s outlook. According to Coinglass:
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Trading volume has declined 10% to $465 million.
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Open interest fell 5% to $314 million.
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Liquidations on August 26 totaled $10K in shorts and only $1K in longs.
This skew suggests more traders are betting against Stellar in the short term. However, the relatively small liquidation volumes indicate that leveraged positions are light, reducing the risk of sudden volatility.
The largest recent liquidation event occurred in mid-July, when millions in positions were wiped out as XLM surged above $0.45. Since then, liquidation levels have eased, showing more sustained but moderate short pressure.
ETF Buzz Adds Fuel to Bullish Case
Beyond technicals, regulatory and institutional developments could provide a tailwind for Stellar. Bloomberg ETF analyst Eric Balchunas recently reported a filing for the Canary American-Made Crypto ETF, a proposed spot fund that would list U.S.-origin tokens such as Stellar.
Balchunas commented:
“Get ready for ETFs to try every combo imaginable.”
If approved, the ETF could expand institutional access to Stellar, particularly among U.S.-based investors who have been waiting for compliant ways to gain crypto exposure. With ETFs already reshaping Bitcoin and Ethereum markets, a Stellar-inclusive fund could significantly boost liquidity and demand.
Key Levels to Watch
For traders and investors, the outlook for Stellar hinges on whether critical support levels hold. The most important thresholds are:
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Immediate support: $0.36 (Fib retracement, right shoulder zone).
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Secondary support: $0.33 (if breakdown continues).
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Neckline resistance: $0.50 (must be broken for bullish confirmation).
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Targets if breakout confirmed: $0.62, $0.82, $0.94, $1.10.
As long as XLM holds above $0.36, the bullish pattern remains intact, with the potential to retest and eventually break past $0.50.
Conclusion: Dip-Buying Opportunity or More Pain Ahead?
Stellar is at a critical juncture. The developing inverse head and shoulders pattern suggests the potential for a powerful reversal that could ultimately send XLM above $1. However, with momentum indicators neutral and trading activity declining, there is still risk of a retest of lower supports at $0.36 and $0.33.
Institutional catalysts, such as the new ETF filing, could be the spark needed to confirm a breakout. Until then, traders may see XLM consolidate further or even dip before its next leg higher.
