Silver Price Analysis: Reaches a technical crossroads

• Silver price has reached a pivotal point in its technical development. 
• There is a possibility of both a continuation to new highs and deeper correction. 
• The trend broadly remains bullish, however, favoring an eventual resumption higher even if a correction unfolds. 

Silver (XAG/USD) price is consolidating in the $31.60s on Tuesday after pulling back from Monday’s eleven-year high of $32.51. 

The pair remains in a short-term uptrend which is biased to extend. It could be forming a Bull Flag continuation pattern (shaded rectangle on chart). 

Silver 4-hour Chart 

If Silver price breaks out above the consolidation rectangle on a closing basis it will activate the Bull Flag and continue the trend higher to the next target at $33.83-5. Further bullishness could even see Silver reach $35.34, a key former high.

A break on a closing basis below the current consolidation range’s lows at $30.95, however, would probably signal a deeper correction was unfolding. 

Silver Daily Chart 

The daily chart is showing some bearish signs which could indicate the possibility of a deeper pull back evolving, however, it is still too early to say for sure. 

A Tweezer Top Japanese candlestick pattern might be forming (shaded circle above) which if confirmed would be a bearish short-term reversal signal. Tweezer Top candlestick patterns occur where price reaches a peak and forms two consecutive days which have long upper wicks – the thin part of the candle from the shaded body up to the high – and whose highs are at a similar level. If Tuesday’s candle closes with a shape similar to the one at the time of writing it will be a signal a Tweezer Top has formed, with bearish connotations. 

The Relative Strength Index (RSI) is also deeply in the overbought zone on the daily chart, suggesting traders should not add to their long holdings. If the RSI exits overbought on a closing basis it will signal a deeper correction is taking place. 

A more bearish correction is likely to find support initially at the $30.00 level of the former range highs. Given the short and medium term trends are still bullish, however, Silver is likely to resume rallying after its correction finalizes. 

It would require a decisive break below the $30.00 level to bring the uptrend into doubt.

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