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Gold is about to drop, and this play will let me cash in big when it does: Trader

Gold's run is almost done, according to gold trader Andrew Keene of AlphaShark, and he has just the way to profit from an expected slide in the precious metal.

The yellow metal has had an incredible year, and that has sent most gold-mining stocks soaring. But with market uncertainty appearing to settle amid the post-Brexit vote rebound, Keene thinks the metal is due for a turn lower.

Keene has picked one gold stock that he sees following an expected downtrend for the metal in the coming months. Barrick Gold (ABX), the world's largest gold-mining company, has seen its shares on the rise since September of last year, following the gold rally. While ABX looks set to keep rising in the short term, Keene believes that investors need to look further down the timeline where the stock could head down if gold were to slide.

"Gold stocks have been on fire," said Keene on Wednesday on CNBC's "Trading Nation." "I think they will pull back, but I want to give them a little bit more time than just July."

Keene looks at both daily and weekly charts of ABX to determine where the stock could go. In the short term, Keene points out that the stock is seeing a "clear bull channel," but he says that based on its relative strength index, "I think ABX might have hit a top here, and I think it's going to sell back off."

"I'm thinking that's the test, around the $19.50 and $20 level, and then I think this can eventually get to $17."

Keene's long-term ABX trade involves buying the October 17 strike puts for $0.75 per share, a trade that could yield great rewards if ABX plunges into the fall.

"I have until October, so I'm giving myself a long time away as I think Barrick has topped here," Keene said, adding: "It's a countertrend trade, so I have to proceed with caution."

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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.

Brian Sullivan

Brian Sullivan is co-anchor of CNBC's "Power Lunch" (M-F,1PM-3PM ET), one of the network's longest running programs, as well as the host of the daily investing program "Trading Nation." He is also a frequent guest on MSNBC's "Morning Joe" and other NBC properties.

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