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
(Click on image to enlarge)
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.
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