Time to cash in on the financials – here’s how to do it: Trader

Long-frustrated investors in financial stocks are about to enjoy their moment in the sun, according to chart-focused trader Todd Gordon of TradingAnalysis.com

"Financials have been underperforming for a long period of time and just in the last month or so we're starting to see those financials catch up to the likes of consumer discretionary and technology," Gordon said Friday on CNBC's "Trading Nation."

The financials-tracking exchange-traded fund XLF rose more than 1.5 percent on Friday after the jobs report crushed expectations, sending interest rates higher, and potentially making a Federal Reserve rate hike more likely. This would be good news for the financials, which have long been feeling the pain of low rates.

After Friday's rise, the sector turned narrowly positive on the year, while the S&P 500 as a whole is up nearly 7 percent.

Turning to the charts, Gordon says that the XLF has recently made an "inverse head and shoulders" pattern, "which does indicate underlying strength."

"I think we are set to launch from this zone of resistance," Gordon said.

To capitalize on this move, he recommends buying the September 23-strike call for $1.12. This trade will turn a profit if the XLF closes above $24.12 in mid-September, when the options expire.

"[I'd] like to use the leverage of the options market to establish a long position," Gordon said.


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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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