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Sell this stock on oil rally: Trader

Energy stocks got a boost Monday as crude oil rallied 2.5 percent. But while some may view the rally as a sign of renewed strength in the beaten sector, one trader warned the selling isn't over.

"I think oil is a sell on the rally," Andrew Keene said Monday on CNBC's "Trading Nation." And to get short the space, Keene eyed one oil name in particular: Schlumberger.

"We've seen a ton of [bearish options] activity in Schlumberger in the past couple of weeks," said Keene, founder of Keene on the Market. "We saw an institution buy a large lot of the September 75-strike puts for 80 cents," he added. That's a bearish bet that the stock will fall below $74.20, or 12 percent, by September expiration. The stock is currently trading above $84.

In addition to bearish options activity, Keene said the chart of Schlumberger shows little reason to buy in. "Schlumberger has been in a clear bear channel and I think we head lower," he said. Shares of the oilfield services company are down 9 percent in the past three months.

Read MoreDon't get too comfortable--rally may be brief

Keene noted the shares are weak relative to their shorter-term moving averages, highlighting the 20-day and the 50-day. The stock is currently testing its shorter-term 20-day moving average, and the last four times the stock has done so, it's resulted in a sharp selloff. "Schlumberger also hasn't been able to run through its 50-day moving average since June. This is one of those stocks that is a sell on the rally," he added.

The combination of poor technicals coupled with an increase in bearish options activity prompted Keene to buy puts of his own. He purchased the September 75-strike puts for 50 cents, which is a bearish bet that the stock will fall below $74.50 in a little over five weeks.

"This is a great opportunity to get short an oil name via buying puts," added Keene.

Wall Street consensus appears to be on the opposite side of Keene, however, as of the 41 analysts surveyed by FactSet, the average analyst price target for Schlumberger is $102.09 and the rating is "overweight."

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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.

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