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Silver Price Analysis: Reaches a new May high, but falls due to overbought

  • The price of Silver has reached a new May high following the release of US data.
  • Silver is overbought on the 4-hour chart and is in the process of pulling back.
  • It could correct lower, but the overall uptrend suggests it will recover and continue rising.

The price of the Silver (XAG/USD) has risen to a new May high of $29.20 following the release of US data.

Silver is in a short-term uptrend but has become overbought according to the RSI momentum indicator. Furthermore, the RSI presents a bearish divergence from the price.

4 hour chart

A bearish divergence occurs when the price reaches a new high but the RSI does not follow it, as occurred between May 10 and 15. It is a bearish signal.

The price is retracing on the current bar and it looks like it could be forming a bearish Shooting Star candlestick pattern. If such a pattern is confirmed at the close and is followed by another bearish bar, the Shooting Star will gain relevance and denote a bearish reversal. short term.

When taken in conjunction with the RSI indications, it could be indicating Silver is about to undergo a correction – a lot depends on how the current and following bars develop.

However, the short-term bullish trend should reaffirm and Silver should rise. A break above the day's high at $29.20 could provide further confirmation of further upside to the next resistance level around $30.00.

A decisive break below $27.97 would call the short-term uptrend into question.

A decisive breakout would be accompanied by a long Japanese candle that closed near its lows or three consecutive red candles.

Source: Fx Street

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