Trader could more than double his money by betting against Goldman

The financial sector has bounced back about 2 percent since last Wednesday, and Goldman Sachs is one of the names that has followed along. But the Goldman bounce is short-lived, says Todd Gordon of Gordon says the charts give him a reason to bet against the banking giant.

First, Gordon looks at the TLT, the ETF that tracks 20-plus year bonds. The trader says that the "stubbornly strong" action in bonds, with the TLT rising about 1 percent since the start of May, indicates that yields can fall even further, which is bad news for banks.

"U.S. Treasuries will move up and bond yields will drop perfectly and inversely, which will take away that net interest margin earning capability of the financials," said Gordon Tuesday on CNBC's "Trading Nation." "So Goldman looks like it's set to move lower."

Second, Gordon believes that some overall weakness could be appearing in the market that could spill over into the financials. Since the tech sector has been the biggest driver of the market rally so far this year, Gordon pulled up a chart of the Nasdaq 100-tracking QQQ to show that it is "hesitating" around the $140 mark. To Gordon, this implies that there is some "[loss] of leadership" by the big-cap tech stocks that could impact the overall market.

To determine how low Goldman could fall, the trader points to a "vulnerable support shelf" at around the $215 mark. The stock recently bounced off the $215 support, but only to return to the level again, implying to Gordon that the bank could fall right through to the downside.

"Usually when [a stock falls back down to support] a second time, they want to push through and capture any stop losses below that market," explained Gordon.

To prepare for a downside in Goldman, Gordon wants to buy the June 9 weekly 215-strike puts and sell the June 9 weekly 210-puts for a total of $1.95, or $195 per options contract. If Goldman were to close above $215 on June 9 expiration, the trader would lose $195, the premium he paid to make the trade. If, however, Goldman closes at or below $210 on June 9, Gordon would make a maximum profit of $305.

In other words, he could more than double his money by betting on a drop in Goldman.

After a soft open, Goldman shares rose nearly 2 percent on Tuesday.


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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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