These stocks are entering a 'sell zone': Technician

China's markets are bouncing back this week, with the Shanghai composite index rising more than 4 percent in two days. However, one trader is betting that Chinese stocks will soon see another big swing, this time to the downside.

Todd Gordon of said the China large-cap ETF (FXI) is about to run into resistance at the $40 level, which could put a stop to its recent rally.

"The market has retraced off the lows after the big emerging markets and Chinese rout that we saw to the downside. I think the market has rallied back into a nice, corrective sell zone," Gordon said Friday on CNBC's "Trading Nation."

Although FXI fell slightly after the opening bell Friday, the ETF is on track to end the week up almost 5 percent.

Read MoreThe next stocks to get hit by the China earnings threat

Gordon sees FXI going back to $36, a 7 percent drop from where it traded Friday morning.

"When $40 trades, I'm going to go ahead and get short the market," Gordon said, by selling the November 40-strike call and buying the November 42-strike, creating a call spread for 52 cents each.

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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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