The smart money is betting on this sector

The American consumer is spending money, and investors are cashing in.

The consumer discretionary ETF, the XLY, is up more than 4 percent this year, making it the second-best performing sector in 2015. And one trader who relies heavily on the options market is betting on a massive breakout over the next two months.

"I think the XLY is heading to $80," said Andrew Keene, founder of Keene on the Market. And his reasoning is based on a combination of strong technical patterns and large institutional call buying in the options market.

"The XLY has been in a very clear bullish uptrend channel since consolidating in 2012," Keene said Thursday on CNBC.com's "Trading Nation." "But recently we've seen a little bit of a pullback." The XLY is down 2 percent from its recent high. "But the ETF has found support at its 50-day moving average," Keene said, adding that the next level of downside risk could be at the 100-day moving average at around $72. "I like to buy strong [trends] on a pullback."

Additionally, Keene has seen some notably bullish activity in the options market. "There's been some strong institutional order flow," he said. "We saw an institution targeting those June 80-strike calls." Specifically, there were 50,000 June 80-strike calls bought for 37 cents each. Since one options contract accounts for 100 shares (50,000 x $37), this is a $1.8 million wager that the XLY will be above $80.37, or roughly 7 percent higher, by June expiration. "This trade would take out the previous high of [about] $77," Keene said.

In other words, the smart money is betting big on the XLY.

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The large bet prompted Keene to put on a similar strategy, "I bought the XLY June 80-strike calls for 36 cents," he said. "My potential reward on this trade is unlimited."

"Buying on a pullback in the XLY is a great risk/reward setup here."

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