The charts show why one trader is betting against Tesla

Trader Todd Gordon says the charts are showing that at least in the near-term, it will pay to bet against Tesla.

The most valuable automaker in the U.S. has come off record highs that it hit in mid-May, and Gordon says that while he does hold long-term bullish calls in Tesla, "signs of underperformance" have convinced the founder that he needs to hedge against a move down in the stock. More specifically, Gordon shows that on a chart of Tesla versus the Nasdaq, the automaker is actually starting to fall behind the tech-heavy index.

"Tesla put in its high right at $330, but has since been unable to recapture that high as the Nasdaq has broken through," said Gordon Monday on CNBC's "Trading Nation." "Now what's happening is they've both begun to drop back on this volatility surrounding politics in the U.S. So I think Tesla's inability to break out in the near-term, coupled with this increased volatility we've seen, sets up a lower move in Tesla."

Gordon predicts that the stock could be on its way back to $295, a low it hit at the beginning of May before a record run. This would be a drop of 4 percent in the stock from Monday's levels.

Gordon is looking to buy the June 2 weekly 305-strike puts while also selling the June 2 weekly 295 puts for a debit of $3.50, or $350 per options contract. This means that if Tesla were to close above $305 on two Fridays, Gordon would lose $350, but if Tesla were to close below his $295 level, Gordon would make $695, more than tripling his money.

Gordon would start to see profits on the trade once the stock falls below $301.95.

"If the value that we just put out there, which is $3.50, gets cut in half and goes down to about $1.50, I will exit the trade and simply contain risk," he said. "Otherwise, it looks like we have a sub-$300 test in Tesla."

With Monday's drop of 1 percent, Tesla has fallen about 6 percent from its record high.


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Trading Nation is a multimedia financial news program that shows investors and traders how to use the news of the day to their advantage. This is where experts from across the financial world – including macro strategists, technical analysts, stock-pickers, and traders who specialize in options, currencies, and fixed income – come together to find the best ways to capitalize on recent developments in the market. Trading Nation: Where headlines become opportunities.

Michael Santoli

Michael Santoli joined CNBC in October 2015 as a Senior Markets Commentator, based at the network's Global Headquarters in Englewood Cliffs, N.J.  Santoli brings his extensive markets expertise to CNBC's Business Day programming, with a regular appearance on CNBC's “Closing Bell (M-F, 3PM-5PM ET).   In addition, he contributes to CNBCand CNBC PRO, writing regular articles and creating original digital videos.

Previously, Santoli was a Senior Columnist at Yahoo Finance, where he wrote analysis and commentary on the stock market, corporate news and the economy. He also appeared on Yahoo Finance video programs, where he offered insights on the most important business stories of the day, and was a regular contributor to CNBC and other networks.

Follow Michael Santoli on Twitter @michaelsantoli

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