Nifty Breaks Below Key Support: Are Bears Gaining Control Over the Market?
Nifty 50 falls below 20-day EMA, indicating a bearish trend. Learn what the charts, indicators, and options data suggest for the next move. Will Nifty test 24,800 next?
The Indian stock market witnessed a clear change in mood this week, as the Nifty 50 index slipped below a critical support level, triggering caution among traders and investors alike. After a strong rally in recent weeks, the correction seen on July 11 signals that bears may be tightening their grip, at least in the short term.
With momentum indicators flashing red and technical structures showing signs of weakness, the road ahead for the market might get bumpy. Let’s decode what exactly happened and what it means for the coming sessions.
1. The Breaking Point: Nifty Falls Below 20-Day EMA
Thursday’s session began on a sour note. The Nifty 50 opened with a gap-down at 25,256, stayed under pressure throughout the day, and eventually closed at 25,150, down by 205 points (0.81%)—its lowest close since June 24.
More significantly, the index broke below the 20-day Exponential Moving Average (EMA) as well as the midline of the Bollinger Bands (the 20-day Simple Moving Average)—both considered important short-term support levels. Historically, when the index falls below these lines, it often signals a weakening of bullish momentum and the beginning of a bearish phase.
This shift is not just cosmetic—it reflects actual investor sentiment and a reluctance to buy aggressively at higher levels.
2. Technical Picture: Lower Highs and Lower Lows
The Nifty 50 has now formed a bearish candle with an upper shadow for two consecutive sessions. This suggests sellers are stepping in during any intraday rally attempts, a classic sign of selling pressure at higher levels.
The technical charts reflect a sustained pattern of lower highs and lower lows, confirming a prevailing downtrend. Momentum indicators are also aligning with this bearish outlook — the RSI has declined to 48.75, signaling weakening strength as it moves into the lower range. Additionally, the Stochastic RSI has slipped into oversold territory, and the MACD continues to show a negative crossover, with its histogram indicating increasing downside momentum.
Amol Athawale, VP – Technical Research at Kotak Securities, highlighted the significance of the breach:
“After a long time, Nifty slipped below the 20-day SMA zone, which supports further weakness from current levels. We believe that as long as the market remains below 25,300, the weak sentiment is likely to continue.”
3. Key Levels to Watch: Support and Resistance Zones
From a pure level-based perspective, the index is now resting near immediate support at 25,000. If that fails to hold, the next critical level lies at 24,800, which marks the low of the last major bullish candle. Any fall below this could lead to a quick test of 24,650, according to technical experts.
On the upside, 25,300 now acts as a resistance. If the index manages to reclaim and hold above this level, it could invite some short-covering and push the Nifty toward 25,550–25,650.
But for now, the structure favors the bears.
4. Options Data Confirms Bearish Sentiment
Options data offers some confirmation of the overall weak setup:
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On the Call side, maximum open interest (OI) was observed at 25,500, followed by 25,300 and 25,400 strikes. Heavy Call writing at 25,300, 25,200, and 25,500 suggests traders expect the index to struggle at these levels.
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On the Put side, the 25,000 strike has the highest OI, which confirms it as immediate support. Further, Put writing was seen at 25,000, 25,200, and 25,150 levels.
Overall, this setup shows that 25,300 is a hard ceiling unless a sharp turnaround occurs, while 25,000 remains the critical floor, at least for now.
5. Bank Nifty: A Mirror of Uncertainty
The Bank Nifty index also ended lower, falling 201 points to close at 56,755. While it found some buying support near its previous week’s low at 56,600, the index still formed a bearish candle with a long upper shadow, suggesting consistent selling at higher levels.
For the week, Bank Nifty dropped 0.5%, forming a candle pattern that reflects indecisiveness and weakness. Currently hovering near its 20-day EMA at 56,730, the index is at a crucial decision-making point. Momentum indicators, particularly RSI, remain sideways, implying a lack of direction.
Sudeep Shah, Head – Technical and Derivatives Research at SBI Securities, notes:
“The zone of 56,200–56,300 will act as immediate support for the index. On the upside, the 57,100–57,200 zone will be a crucial hurdle. A decisive breakout in either direction will lead to a trending move in the index.”
6. Volatility Watch: India VIX Shows Slight Uptick
India VIX, which reflects market volatility, edged higher by 1.24% to 11.82 on Friday, following a three-day decline. However, it was still down over 4% for the week, indicating that while bearish sentiment is building, there's no widespread panic among investors just yet.
A low VIX typically indicates complacency, but any sharp rise could mean a sudden risk-off move by market participants. Traders should watch this closely in the coming week.
What Should Investors and Traders Do?
For short-term traders, the current range of 25,000 to 25,300 on Nifty will be critical. A break below 25,000 could lead to a quick 150–200 point decline, while a breakout above 25,300 could signal a reversal.
For long-term investors, this may not be the time to panic. Corrections like these are healthy for the markets, especially after strong rallies. Instead, they should track support levels to accumulate quality stocks during dips.
Meanwhile, sectoral rotation continues to play out, with defensives like FMCG, Pharma, and Utilities showing resilience.
Conclusion: Market at a Tipping Point
The break below the 20-day EMA and midline of the Bollinger Bands has tilted the momentum in favor of the bears. Until the index reclaims 25,300, any rebound may just be a relief rally. Watch out for key support at 25,000 and 24,800, and be cautious of any sharp moves triggered by global cues or domestic earnings announcements.
With the Bank Nifty also at a crossroads and India VIX waking up slightly, the coming week could offer more volatility and potentially, trend-defining moves.
Stay alert, trade smart, and always manage your risk.
Author’s Note:
As market participants, we must always stay tuned to the pulse of price action and technical signals. This breakdown of Nifty’s current positioning is meant to help you understand where the market stands, what the risks and opportunities are, and how to prepare for the days ahead.
This content is intended purely for educational and informational purposes. It does not constitute financial advice. Readers are encouraged to consult with a SEBI-registered financial advisor before making any investment decisions.
Happy trading and investing!
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