Introduction
Bitcoin’s recent dip to $112,000 appears directly linked to bearish divergence patterns on short-term charts, where price momentum failed to confirm new highs. With key indicators now resetting from oversold conditions and BTC consolidating above critical support, traders are watching whether this pause represents a bear flag formation or a springboard for the next leg upward. The broader weekly chart structure suggests the underlying uptrend remains healthy as long as Bitcoin maintains its position above the $108,000 support level.
Key Points
- Bearish divergence on 4-hour charts (price higher highs vs indicator lower highs) likely caused BTC's drop to $112,000 support
- Weekly chart shows BTC trading in defined range with $108,000 aligning with 0.618 Fibonacci level, creating solid support foundation
- Daily momentum indicators are resetting from oversold conditions, potentially setting stage for upward move toward $115,700-$117,500 resistance
Short-Term Divergence Triggers Correction
The recent Bitcoin price decline to $112,000 finds its technical explanation in bearish divergence observed on the 4-hour timeframe. As BTC approached the $117,500 horizontal resistance level, a classic divergence pattern emerged: while price continued climbing, both the Stochastic RSI and RSI indicators registered lower highs. This disconnect between price action and momentum indicators signaled underlying weakness that ultimately manifested in the pullback to the $112,000 support zone. The strength of this short-term divergence proved sufficient to trigger a broad-based decline across Bitcoin markets.
Following the dip, Bitcoin has entered a consolidation phase, trading sideways as the market digests the move and prepares for its next directional commitment. Some technical analysts have noted the potential for this consolidation pattern to form a bear flag—a continuation pattern that would suggest further downside. However, countering this interpretation is the fact that the sell-off drove shorter-term Stochastic RSI momentum indicators into deeply oversold territory, allowing for a complete reset that often precedes renewed upward momentum.
Daily Chart Sets the Battle Lines
The daily timeframe presents a more complex picture with multiple technical elements in play. Most notably, Bitcoin has found firm support at a key horizontal level, bouncing solidly from this zone despite currently trading below both the 50-day and 100-day simple moving averages. This positioning sets up a critical technical battle, where bulls will use any upward impulse to attempt reclaiming these important moving averages. The immediate resistance levels to watch sit at $115,700 and $117,500—the latter representing the recent high that triggered the bearish divergence.
Meanwhile, the daily Stochastic RSI indicators continue their descent toward oversold territory. This particular momentum marker on the daily chart has historically accounted for significant price movements, meaning that once these indicators complete their reset at lower levels, they could provide the fuel for the next sustained upward move. The TradingView analysis suggests that the current consolidation allows this necessary reset to occur while price maintains its position above critical support.
Weekly Framework Supports Bullish Thesis
Zooming out to the weekly timeframe reveals the broader context that keeps the overall bullish thesis intact. Bitcoin price action is currently contained within a well-defined trading range, with the lower boundary coinciding perfectly with the $108,000 horizontal support level. This technical confluence is strengthened by the fact that this support level aligns with the 0.618 Fibonacci retracement level, adding mathematical significance to this price zone.
The extended consolidation within this range is building what technical analysts describe as ‘beautiful market structure’ above the $108,000 foundation. The longer price action remains contained within this range, the more potential energy accumulates for a significant breakout move. The prevailing uptrend remains the dominant technical narrative, with nothing in the current weekly chart structure suggesting a bearish reversal. The market continues to digest the move to $124,000, and as long as Bitcoin maintains above $108,000—with no weekly close below this level—the path of least resistance remains upward.
Only a decisive break below the $108,000 support, confirmed by a subsequent candle opening beneath this level, would invalidate the current bullish structure. Until that occurs, the technical setup suggests that Bitcoin is building a base for its next advance, with key resistance levels at $115,700 and $117,500 serving as initial targets for any sustained upward movement.
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