Before the uber Apple bulls bash me for the title of this article, let it be known that I love Apple. I’ve been a loyal customer since the iPod, I am long the stock, and I have full faith that long term, the company will continue to innovate in new and exciting product categories, whether it be a self driving car, wearables, a TV, or something else. In no way am I recommending long term investors to sell the stock, rather, this is idea generation for a potential short trade. 

The technicals of Apple illustrate a weary picture in the short term, and the stock may be an ideal short candidate with a potential return of more than 20%. Here’s why.

A bearish head and shoulders pattern in shares of Apple has developed, and IF the stock decisively breaks below neckline support around $109, it may result in a decline of more than 20%, to $84. The $84 price target is based on a measured move from the head to the neckline. Further more, a death cross has occurred and the stock was rejected at the 200 and 50 day MA. Both moving averages are beginning to roll over.

Shares of Apple are flat YTD, and the already low valuation, relative to peers and the S&P, doesn’t look like it can go much lower, but the overall market is flashing warning signs and will act as additional pressure on the stock if we see the market rollover. 

If Apple breaks below the H&S neckline, consider purchasing the Feb $95 or Mar $95 puts. Or, short the stock at $109 and set a stop at $112. You are risking $3 to potentially make $25, representing a favorable risk/reward profile.

If Apple does indeed grace us with a 20% sell off, strong buy.