Trader makes a contrarian case for betting on the financials

The lagging financial sector could be set for a rebound as bonds slide, according to Todd Gordon of

"If this stock market break is for real, we should be able to get down and test lower levels in the bond market," Gordon said Tuesday on CNBC's "Trading Nation."

"And as the bond market moves lower, the financials should benefit, and that's what we're seeing in today's session."

On a chart of the Financial Select Sector SPDR Fund (XLF), Gordon shows that $24 is the level to watch.

"XLF had a nice push up, and now we have begun to end the correction," he said.

Gordon says the $24 mark was the old resistance level on the XLF, which tracks names like like Berkshire Hathaway, JP Morgan Chase and Bank of America.

The ETF closed Tuesday at $23.34, or up 1.26 percent. Even as the S&P 500 has hit all-time highs, the financials have lagged — it's the only sector that remains negative on the year.

But Gordon is betting for his next trade on a continuation through the "resistance of $24," and is planning to use a call spread to speculate on a rise to $25.

Other traders predict that financials will continue to lag the market due to a lack of momentum and an unfavorable bond-yield environment.


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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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