Nifty(5087.3): Markets had a follow through to the hanging man pattern - throwing in a short term sell signal. However the internals of the move still remains a bit ambivalent giving an outside chance of one more rise before turning lower. If Nifty heads higher it may either stop at 5217 or below or head slightly higher.
Two important points from yesterday. One, as pointed out only now Portugal is getting media coverage. Second, the A is to C ratio that we discussed yesterday(see yesterday's chart) needs a small explanation. If that ratio is about to play out, I will not be surprised if Nifty heads to even as low as 3900. Unfortuantely, this will be an Iron-clad confirmation only when Nifty hits 4800. Until that one has keep positions small.
So how do play the current set up? Play it through puts- Long 4800 put around 23-26 and forget it (Fixed risk). If you are aggressive - write 5200,5300 calls and if Nifty crosses 5225 fold the trade.(The premium could double if the set up is wrong).
Support: 5065 and 4990
Resistance: 5170 and 5225