3 reasons XLM could reverse soon

The outlook for XLM price is bullish during the ongoing crypto rally. However, there is a risk of a harsh reversal in the next few days.

First, Stellar price could drop due to mean reversion, a concept where assets often return to their historical averages. In XLMs case, the price has jumped 142% above the 50-week and 200-week Exponential Moving Averages during the rally.

Therefore, if mean reversion occurs, there is a risk that the coin will drop closer to these averages.

Second, XLM price could reverse sharply because it has become extremely overbought. The Relative Strength Index has jumped to 83, while the two lines of the Stochastic Oscillator are approaching 100. Rising oscillators indicate momentum, but such moves often precede sharp declines.

Third, Stellar price may reverse to form a break-and-retest pattern. It rallied above the key resistance level at $0.1624—its July 2023 high—last week. In most cases, financial assets retest key support levels before resuming a bullish trend. Therefore, XLM will likely drop to $0.1624 before resuming its upward movement.