Silver Price Analysis: Reaches new high for May but pulls back after becoming overbought

Silver price has risen to a new high for May following the release of US data.
Silver has become 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 pushing higher.

Silver (XAG/USD) price has risen up to a new high for May at $29.20 after the release of market-moving data from the US.

Silver is in a short-term uptrend but it has become overbought according to the Relative Strength Index (RSI) momentum indicator. The RSI is also diverging bearishly with price.

4-hour Chart

A bearish divergence occurs when price rallies to a new high but RSI does not follow suit as happened between May 10 and May 15. It is a bearish sign.

Price is pulling back on the current bar and looks like it might be forming a bearish Shooting Star Japanese candlestick pattern. If such a pattern is confirmed on close and it is followed by another bearish bar the Shooting Star will gain relevance and denote a short-term reversal lower.

When taken together with the indications from the RSI, it could be indicating Silver is about to undergo a correction – much depends on how the current and next bars develop.

Eventually the short-term uptrend should reassert itself, however, and Silver price rally higher. A break above the day’s high at $29.20 could give added confirmation of more upside to the next resistance level at circa $30.00.

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

A decisive break would be one accompanied by a long red candlestick that closed near its lows or three red candlesticks in a row.

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