Stellar’s XLM token is showing signs of a potential breakout after forming a falling wedge pattern on its chart. This technical formation, often associated with price surges, is creating a buzz among traders, who believe the cryptocurrency could be set for a 30% rally. However, as the market remains volatile, XLM faces several hurdles before reaching its full potential.

Key Levels in Focus for XLM’s Price Movement

Currently trading at approximately $0.3172, XLM is at a pivotal point in its price action. The cryptocurrency has formed a falling wedge pattern, a setup that often signals a bullish breakout once the price breaks above the upper boundary of the pattern. For XLM, this key level of resistance is located at $0.3400. A breakout above this level could trigger a rally, with the next target set at $0.445, marking a potential 30% surge from its current price.

However, if XLM fails to break above $0.3400, the token could continue to face downward pressure. The immediate support for XLM is found at $0.3047, and if this level is breached, the price could drop further toward $0.2600, a much stronger support level. A decline to this point would suggest that the bearish trend has gained momentum, and traders may start to favor selling over buying.

Bearish Indicators Could Limit Immediate Gains

While the falling wedge pattern signals potential upside, several technical indicators are showing signs of bearish pressure in the market. One of the most significant signals is the Death Cross, where the 50-day Simple Moving Average (SMA) crosses below the 200-day SMA. This often suggests that the market lacks buying momentum, with sellers maintaining control.

Additionally, the Directional Movement Index (DMI) confirms this bearish sentiment. The -DI (sellers) is significantly higher than the +DI (buyers), indicating that selling pressure is stronger than buying interest. The ADX reading of 31.00 also supports the notion of a strong downtrend in place. For a reversal to occur, the +DI would need to rise above the -DI, signaling that buyers have regained control.

Liquidity and Market Sentiment: Short Liquidations Outpace Longs

Market sentiment is currently tilted toward the bearish side, as seen in the liquidation data. According to Coinglass, short liquidations have far outpaced long liquidations, with $30.05K in short liquidations compared to $18.79K in long liquidations. This trend suggests that more traders are betting against XLM, anticipating further declines in the token’s price. Liquidations often lead to increased volatility, and this could cause rapid price fluctuations in the short term.

Funding Rates and Open Interest Reflect Market Uncertainty

The market’s funding rate also hints at a continued bearish outlook. With a negative funding rate of -0.0130, traders are paying to hold short positions. This indicates that the market remains largely pessimistic about XLM’s near-term prospects. The predicted funding rate of -0.0164 suggests that the bearish sentiment may persist unless buying pressure increases.

However, there has been a rise in Open Interest, which has increased by 1.84% to $145.76 million. This indicates growing trader participation and anticipation of price movement, whether XLM breaks through resistance at $0.3400 or faces further downside toward $0.2600.

Conclusion: A Critical Moment for XLM’s Price Action

XLM’s price is at a crossroads, with the potential for a breakout or a continuation of its bearish trend. Traders will need to keep a close watch on the resistance at $0.3400 and support at $0.3047. If XLM breaks above $0.3400, a rally toward $0.445 could be in the cards. On the other hand, a failure to hold support could lead to further declines.

With rising volatility and growing Open Interest, the next few days could be crucial for Stellar’s XLM. The token’s price action remains uncertain, but the technical setup suggests that either a breakout or a deeper correction is likely in the near future. Traders should remain vigilant and be prepared for rapid changes in market conditions.