×

The ‘Trump trade is back on,’ and there’s one industrial name you should bet on: Technical analyst

Monday's rally in the Dow has trader Todd Gordon making the case for industrial stocks.

The index hit another intraday record high Monday, and industrials have been some of the biggest drivers over the past week. The sector is one of the most significant so-called Trump trades since the November election, and has continued its surge to be up more than 17 percent since Nov. 8, which was Election Day.

"We're seeing a resumption in the bull trend led not by tech, but in fact industrials and health care," the TradingAnalysis.com founder said Monday on CNBC's "Trading Nation." "It looks like the Trump trade is back on."

In fact, one of the biggest drivers of the Dow's record-setting Monday was aircraft manufacturer United Technologies. And according to Gordon, the industrial is about to make new all-time highs based on the charts.

"You can see we've been in a very nice uptrend channel, clearly defining support on the downside," he said. "We can also draw a parallel uptrend channel, possibly bringing us above $125 [as high as] the $130 mark."

In other words, Gordon is saying that connecting and following the stock's highs since November 2016 suggest that United Technologies could hit $130.

But while Gordon says United Technologies may be able to rally 7 percent from its current levels to $130, he wants to use $125 as a more attainable "decision point" for his trade. As a result, he wants to buy the July monthly 120-strike calls and sell the July monthly 125-strike calls for a total of $2.20, or $220 per options contract.

If United Technologies closes below $120 on July 21 expiration, then Gordon would lose the $220 he paid to put on the trade. But if the stock were to close above $125 on July 21, then Gordon would see a maximum reward of $280, meaning he would more than double his money on the trade.

If the value of the trade falls from $220 to $110, Gordon plans to exit the trade at a loss.

United Technologies is currently up more than 10 percent year to date. The industrial sector as a whole is up almost 11 percent this year.

Videos

Trades to Watch

Trader Bios

About

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.

Brian Sullivan

Brian Sullivan is co-anchor of CNBC's "Power Lunch" (M-F,1PM-3PM ET), one of the network's longest running programs, as well as the host of the daily investing program "Trading Nation." He is also a frequent guest on MSNBC's "Morning Joe" and other NBC properties.

Read more

Connect