Oil is going back to $49 — ‘get on board’: Trader

Crude oil broke above $42 this week, and the trader who nailed oil's drop to $26 says the energy rally has plenty of room to run.

"We have a full-on commodity breakout here," Todd Gordon of TradingAnalysis.com said Thursday on CNBC's "Trading Nation."

In the Federal Reserve's Wednesday policy statement, the central bank "was quite easy, paving the way to higher commodity prices and lower dollar in unison with the rest of the global central banks," he said.

"Let's get on board" with the move higher in commodity prices.

Back in November when crude was trading at $41 a barrel, Gordon famously called for crude to bottom at $26 — something that seemed highly improbably at the time. But on Feb. 11, crude bounced forcefully off of $26.05 — a low the commodity has not seen since.

At this point, "we've poked our head above resistance," Gordon said. "I like the upside in crude oil. We should be able to go back and retest the old highs from October, which is around $49."

The way Gordon plans to trade oil's surge is through the ETF that tracks the commodity, USO.

"We're going to look to make a move up towards about a 50 percent retracement of the most recent drop," said Gordon.

The 50 percent retracement corresponds to the August low of $12.37 in the ETF, which sets up for a nice confluence of technical resistance and an established long-term target, Gordon said.

To play for a leg higher, Gordon bought the April 10/12 call spread for 60 cents. This is a bullish bet where a trader will buy a call and sell a higher-strike call to offset the cost. The goal is for the stock or ETF to rise to that higher strike, which in this case is $12, by April expiration.

That would represent a 21 percent rise from Friday's opening price.


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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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