The chart that has one technical analyst betting against stocks

Technical trader Todd Gordon is betting on even more downside for the market after two tough weeks for the S&P 500.

"With the recent volatility, we have in fact broken uptrend support," the founder of TradingAnalysis.com said Monday on CNBC's "Trading Nation." "That is not going to be a constructive thing for the bulls."

Gordon is referring to a chart that shows the S&P 500-tracking ETF SPY has broken below what he sees as "support" at $244.

On a chart of the SPY, Gordon points out that the ETF has been making a series of higher lows starting in April, and connecting those dots shows where the market's support lies. But with the SPY falling as low as $241.83 on Monday, the market has decisively broken below that trend line.

As a result, Gordon believes the SPY could fall back to its April lows of $232.51, which represents the first chronological point on that support line.

In order to cash in on such a move, Gordon is buying the September 241-strike put and selling the September monthly 236-strike put for a total credit of about $1.37, or $137 per options spread.

That $137 is the most he could lose on the trade, but if that SPY closes at or below $236, he will see a profit of $463.

There is one caveat, however. In order to mitigate losses, Gordon will sell out of the trade if the SPY breaks above $244, as that will indicate that his thesis is "invalid."

Since hitting a record high on Aug. 8, the S&P 500 has fallen as much as 3 percent through Monday's low.

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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.

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