Stellar (XLM) is under renewed selling pressure this week, even after a modest recovery from last week’s sharp market correction. While prices have bounced slightly, derivatives data and on-chain signals paint a cautious picture. Many traders seem to expect further downside, not a full reversal.
Derivatives show traders leaning bearish
Recent numbers from CoinGlass suggest sentiment is turning sour. The long-to-short ratio for XLM dropped to 0.73 on Tuesday, which is near its lowest point in over a month. A ratio below 1 means short positions are outpacing longs, hinting that traders are betting on more declines.
Funding rates are also telling a bearish story. XLM’s funding rate turned negative on Monday and kept sliding into Tuesday. Negative funding rates mean short sellers are paying long holders, which is another sign that the crowd is positioning for a drop.
Meanwhile, CryptoQuant’s data shows mixed signals. Activity is up in both spot and futures markets, with more retail involvement and buying pressure. But that might not be entirely good news. Overheated conditions often lead to short-term pullbacks, so the increased buying could be a trap rather than a launchpad.
Price action and technicals: momentum fading
XLM is trading around $0.195 on Tuesday, sitting above its 50-day and 100-day exponential moving averages at $0.182 and $0.179. That gives a neutral-to-slightly bullish short-term outlook. But it’s struggling to break past the 200-day EMA near $0.198, which is acting as a ceiling.
The relative strength index sits near 45, which points to balanced market conditions. The MACD has slipped below the zero line, though, which signals that bullish momentum is weakening. If buyers don’t step up soon, the risk of another leg lower grows.
Key levels to watch
If the rally can regain steam, the first hurdle is the 200-day EMA at $0.198. A break above that could push prices toward $0.226. But if sellers keep control, support sits at $0.185, then the 50-day EMA at $0.182. A daily close below those levels might open the door to lower support zones around $0.179 and $0.143.
Overall, the data suggests caution is warranted. The bounce we’ve seen so far looks more like a corrective move than the start of a sustained uptrend. Traders might want to wait for clearer signals before jumping in.
