Trader sees a rally in store for this energy name

Occidental Petroleum may be down 2 percent so far this year, but Andrew Keene of AlphaShark sees a rally ahead in the charts.

Keene is looking specifically at the 50-day and 200-day moving averages on charts of Occidental. The trader points out that while there was a "bear channel" that took the stock down below $70, he predicts that Occidental will eventually move higher toward its 200-day moving average, a longer-term trend that suggests the stock will rise.

To figure out how high Occidental could rally, Keene takes a look at the oil company's weekly chart. The trader believes that Occidental hit "resistance" at around $77.50 mid-last year, leading him to think that the company's shares could return to those levels.

As a result, Keene wants to buy the May 72.5-strike calls and sell the May 75-strike calls for $0.75 per share, expiring May 19. "If the stock goes to $77.50, which is only about 10 percent higher in stock, [I can make] three times the capital on my trade," Keene said Wednesday on CNBC's "Trading Nation."

But Keene has set up his trade so that Occidental only needs to close above $75 at expiration, or 7 percent from its Wednesday levels, for him to make a maximum reward of $2.50 per share. To make any money on the trade at all, Occidental would have to close above the breakeven point of $73.25 on May 19. If it remains below $72.50, any money laid out will be lost.

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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.

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