Trading Nation

Trader predicts ‘upside surprise’ for this hot sector

How to play this 'clear bull channel': Trader
Here's what's wrong with the recent rally: Yamada
More pain ahead for retailers?

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 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.

Read More The Fed's going to trick the market, again: Trader

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.

Want to be a part of the Trading Nation? If you'd like to call into our live Wednesday show, email your name, number and a question to