How one trader plans to triple his money betting against Wal-Mart in just two months

Wal-Mart shares have tumbled 2 percent since their earnings pop in mid-February, and the charts are pointing to even more pain for the retail giant.

That's at least according to AlphaShark's Andrew Keene, who believes Wal-Mart could drop to its lows from May 2015, especially as "retail has been very, very weak throughout the last couple of weeks."

On a daily chart of Wal-Mart, Keene said that the retailer's shares are seeing "resistance" at $72. "It has found resistance many times at the $72 level and every time it hit $72, over time it sold off," he said Tuesday on CNBC's "Trading Nation."

This leads Keene to believe Wal-Mart shares could fall to around $65, just slightly below its February lows. This means that Wal-Mart is set for a 7 percent drop in the coming months.


To take advantage of a move down for Wal-Mart, Keene wants to buy the May monthly 67.5-strike puts and sell the May monthly 65-strike puts for a total of 77 cents, expiring May 19. "If Wal-Mart goes to under $65 on May expiration, this spread would be worth $2.50," said Keene. "That's good for 3 ½ times my capital."

Wal-Mart is currently up about 1 percent year to date, dropping off from a high of $72.39 as part of its post-earnings run.

Correction: Keene wants to sell the May monthly 65-strike puts. An earlier version misstated the price.

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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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