One of the best-performing Dow stocks of 2016 has more room to run, says one savvy trader.
Andrew Keene of AlphaShark sees a big rally in the charts for IBM, a stock that's already up more than 12 percent year to date. The computer hardware mainstay hit a year-to-date high of $163.53 in August, but has since dropped slightly and stayed under $160 since September.
But looking at a daily chart of IBM, Keene sees the stock moving toward its 150-day moving average, in line with IBM's end-of-June low that later saw the stock catapulting upward during July.
How high can IBM move? On a weekly chart of IBM, Keene also sees the stock close to hitting its 150-week moving average. As Keene sees IBM making a move up, he believes that the stock can actually retest its 50-week moving average around $165, a level that allows him to set up a trade.
"We have a measured move target to the $165 level, and that's where I think IBM is heading by November," said Keene on CNBC's "Trading Nation."
To play for the move higher, Keene purchased the November 160/165 call spread for $1.10. This is a bet that IBM will rise above $161.10 by November expiration.
"On this trade, if it goes to my measured move target of $165 by expiration, I can get 500 percent return," said Keene. "That $110 will turn into $500. If it sells off, the most I'm out is that $110."
IBM has dropped about 5.5 percent since hitting its 2016 highs in August. Keene is betting that the stock will rise more than 7 percent for his trade following its earnings report next Monday.