Trader predicts ‘upside surprise’ for this hot sector

As consumer discretionary stocks have experienced a pullback in the last week, one trader is still betting on a "clear bull channel" ahead.

Andrew Keene of AlphaShark said Wednesday that the sector's recent drop has become a buying opportunity. "I think we're going straight higher, this is a clear, clear upside surprise," he said on CNBC's "Trading Nation."

Consumer discretionary has been the best-performing sector of the S&P 500 this year, having gained more than 11 percent. Keene is trading the XLY, the ETF that tracks the consumer discretionary sector, and is targeting a move to $84 by January.

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For his trade, Keene is selling the December 80-strike put and buying the December 79-strike put to create a bull put spread for a total credit of 30 cents. This is a bet that the ETF is still above $79.70 at December expiration.

"I want to play this a bit more conservative," he said. "On this trade, I can make money if the stock is flat, goes [slightly] lower or goes higher."

XLY was down modestly at $80.08 in late trading Thursday. Keene said XLY should hold support near its current levels, which had previously acted as resistance.

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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.

Sara Eisen

Sara Eisen joined CNBC in December 2013 as a correspondent, focusing on the global consumer. She is co-anchor of the 10AM ET hour of CNBC's "Squawk on the Street" (M-F, 9AM-11AM ET), broadcast from Post 9 at the New York Stock Exchange.

In March 2018, Eisen was named co-anchor of CNBC's "Power Lunch" (M-F, 1PM-3PM ET), which broadcasts from CNBC Global Headquarters in Englewood Cliffs, N.J.

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