Sell energy stocks on the recent pop: Trader

Suddenly, the market has a new favorite sector: energy. The beaten sector is up more than 10 percent in the past five trading sessions, making it the best performer in the S&P 500 over that period.

The rally comes amid a massive comeback for crude oil. The commodity surged more than 8 percent Monday, settling above $49 a barrel and is now up nearly 30 percent in the last week.

Read MoreUS oil settles up $3.98, or 8.8%, at $49.20 a barrel

But despite the recent strength, one trader is betting that the space will soon resume its decline.

"I think this is a pop that should be sold," Andrew Keene said Monday on CNBC's "Trading Nation." The XLE, the ETF that tracks energy stocks, was up more than 1 percent Monday while the other S&P 500 sectors were in the red. "I think the XLE heads back to the lows."

Looking at a short-term chart of the XLE, Keene noted that the ETF is once again trading at its 20-day moving average. "Every time we've seen the XLE trade at the 20-day, we have found sellers," said the founder of Keene on the Market. "We haven't traded above this moving average since May." Energy is still the worst performing sector in the S&P 500 year to date, down a staggering 17 percent.

Read MoreFamed oil bear loses his growl

So to protect himself from a potential selloff, Keene turned to the options market. Specifically, he purchased the XLE October 61/60 put spread for 20 cents. This is a bearish strategy where a trader will buy a put and then sell a lower strike put to offset the cost—both of the same expiration. In Keene's case, he is targeting a move to $60.80, more than 8 percent lower than its current level.

"I'm giving this trade some time in case we see the rally continue in the short term," added Keene.

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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.

Michael Santoli

Michael Santoli joined CNBC in October 2015 as a Senior Markets Commentator, based at the network's Global Headquarters in Englewood Cliffs, N.J.  Santoli brings his extensive markets expertise to CNBC's Business Day programming, with a regular appearance on CNBC's “Closing Bell (M-F, 3PM-5PM ET).   In addition, he contributes to CNBCand CNBC PRO, writing regular articles and creating original digital videos.

Previously, Santoli was a Senior Columnist at Yahoo Finance, where he wrote analysis and commentary on the stock market, corporate news and the economy. He also appeared on Yahoo Finance video programs, where he offered insights on the most important business stories of the day, and was a regular contributor to CNBC and other networks.

Follow Michael Santoli on Twitter @michaelsantoli

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