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.


Trades to Watch

Trader Bios


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.

Sara Eisen

Sara Eisen joined CNBC in December 2013 as a correspondent, focusing on the global consumer. She is co-anchor of the 10AM ET hour of CNBC's "Squawk on the Street" (M-F, 9AM-11AM ET), broadcast from Post 9 at the New York Stock Exchange.

In March 2018, Eisen was named co-anchor of CNBC's "Power Lunch" (M-F, 1PM-3PM ET), which broadcasts from CNBC Global Headquarters in Englewood Cliffs, N.J.

Read more