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Gold just signaled a sell sign—here's why: Trader

With its two-day rally, gold has turned positive on the year and is making a run back at $1,200. But despite the move higher, one trader is betting that the rally will be short-lived.

On Tuesday's "Trading Nation," Andrew Keene, a trader who relies heavily on charts and the options market, said the momentum in gold remains with the bears.

Looking at a chart of GLD, the ETF that tracks gold, Keene noted that its 20-day moving average is dangerously close to crossing back below its longer-term 50-day moving average. For Keene and other technicians, when a short-term moving average crosses below a long-term moving average, it is considered a sell signal. "This shows that short-term momentum is still on the side of the bears," he said.

But beyond moving averages, he says there are other troubling signs in the gold chart, particularly the fact that the yellow metal "continues to make a series of lower lows and lower highs. To Keene, this could signal a lack of new buyers.

"I see the GLD trading down at $104," said the founder of Keene on the Market. That's 9 percent lower than current levels.

Read MoreGold up jumps as dollar pauses

So to make a bearish bet on GLD, Keene looked to the options market. Specifically, he purchased the September 109/104 put spread for $1.00. The trade is profitable if GLD falls below $108 by September expiration, but it really makes money if it meets his target of $104.

"This is a great way to play the GLD because I'm only risking $100, and if the GLD closes at or below $104 by September expiration I will quadruple my money," he said.

Either way you slice it, said Keene, "gold is going lower."

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