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Charts Look Really Bad for Apple

Note: This post was written by Dan Nathan, Co-founder RiskReversal.com and a contributor to CNBC's "Options Action."

Apple
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Apple

Apple’s is about ten-percent off its recent highs.

And if the chart is any indication, the pain could just be starting.

(Track Apple Stock Here)

There’s a big red warning sign flashing in Apple’s chart that I simply cannot ignore, and neither should anyone else looking to buy shares of the tech titan.

With today’s sell-off, Apple just broke through the lower end of its head and shoulders formation and is just points away from breaking through its well-defined trend line.

What does it mean?

It means if the charts hold, Apple could soon be on its way to $600.

That’s the next battle line investors need to watch. That’s where the stock last found support prior to July’s disappointing Q3 results.

So what’s behind the sell-off now?

While no one thing stands out, the “map” debacle and disappointing iPhone5 unit sales have scuffed Apple’s glorious patina more than most market participants expected.

(Read More: Apple Orders 10 Million iPad Mini Units: Report)

But there’s something else that bothers me. Portfolio managers, who have underperformed their benchmarks all year, might be inclined to sell Apple since it represents a lone bright spot in their portfolios. In short, they gotta lock in profits where they can, and Apple has been everyone’s winner.

Historically, Apple management has paid little attention to the day-to-day price movement in the stock. But I for one would be worried about pressing the shorts here. A stock split or the announcement of an iPad mini (which could come any week) could cause a bit of a short squeeze here.

Dan Nathan is the co-founder of RiskReversal.com and a contributor to CNBC's "Options Action."

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