The chart of the financials has reached a very precarious level, according to TradingAnalysis.com founder Todd Gordon.
Not only is the financials-tracking ETF (XLF) down about 1.5 percent year to date, but Gordon says its underperformance relative to tech stocks makes it among the most vulnerable in the event of a market pullback. Here's why:
The XLF has fallen back down to the $26.50 level about four times this year. Gordon believes any weakness in the XLK could trickle down to financials, and push the XLF tumbling below that level.
Furthermore, big bank names like J.P. Morgan, Wells Fargo and Bank of America have also fallen and are struggling to make a comeback.
As a result, Gordon wants to buy the July 6 weekly 27.5-strike put and sell the July 6 weekly 26.5-strike put for a total of 34 cents, or $34 per options spread.
The trade: Gordon is suggesting buying the July 6 weekly 27.5/26.5 put spread for about 34 cents, or $34 per options spread.
Bottom line: Gordon sees XLF falling as low as $26.50 by July 6 expiration.