There’s trouble brewing in the charts for one Dow stock: Trader

Goldman Sachs has lagged the broader market this year, and Todd Gordon of says the charts are giving off warning signs of an even bigger drop ahead.

Shares of the big bank have fallen nearly 1 percent in 2017, significantly underperforming the S&P 500, Dow and XLF financial ETF, which are up 15, 18 and 12 percent respectively during that time.

It's that underperformance and the recent rally in bonds that leads Gordon to believe there's more pain in store.

"You can see that the daily chart is sitting on the shelf right around the $237 mark. It looks to be in this little pocket of volatility that we're seeing in the market," Gordon said Tuesday on CNBC's "Trading Nation." Goldman should be able to go down and retest this $230 level which we're seeing." Gordon pointed to the stock's gap above that $230 level in late September, noting that "markets do like to close gaps." That's roughly 3 percent lower than where the stock is currently trading.

To play for a move lower, Gordon wants to buy the December 235-strike puts and sell the December 230-strike puts for a total of $1.78, or $178 per options spread. The trade expires on Dec. 15, meaning that if shares of Goldman close above $235 on Dec. 15, then Gordon would lose the $178 he paid to make the trade.

But if Gordon's prediction plays out and Goldman closes below $230 on Dec. 15, then the trader could make a maximum reward of $322.

Goldman shares were lower by around 1 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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