Technical Insights: Bulls surrender, indices breach support levels

Indian stock market bulls finally surrendered after tremendous struggle to sustain above the support levels. Indian benchmark indices gave a positive opening following strong global cues but nosedived in the second half of the session on Tuesday amid a retreat by PSU banks.

Nifty and Sensex shed early gains and closed a per cent down. SBI and Sun Pharma led the downfall, registering 3 per cent and more losses. Only BPCL, Ultratech Cements and IndusInd Bank sustained 1 per cent plus gains.

Even the broader markets tumbled with mid-cap and small-cap losing 0.8 per cent and 1.3 per cent, respectively. Market breadth too remained negative with 658 advances and 2,041 declines.

Technically, Indian benchmark index Nifty breached its upward sloping trendline support at 10,360 after a short covering at the start of the day on Tuesday. Thereafter, Nifty also broke its two major supports at 10,300 and 10,275 levels. This breakdown could also be termed as a Kind of Head and Shoulders pattern neckline breakdown. After resisting multiple times at 38.2 per cent retracement level at 10620-10630, Nifty was trading in a range of 10,620 to 10275-10300.

Now, Nifty has breached its all major EMA support levels barring 200 days EMA which stands at 10099 for now. Thereby going forward, we hold 10,100 followed by 10,033 as immediate supports. The 9685 level is a major reversal for the Nifty in the medium term. On the upside, 10315-10375 followed by 10,425 will act as resistances.