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Today’s market action gives me a reason to buy one hot ETF: Trader

This group of banks could breakout

Financials jumped Monday as bond yields surged following the weekend's French election results, and Todd Gordon of sees more upside for a specific group of banks.

TLT, the ETF that tracks long-term U.S. Treasury bonds, dropped as much as half a percent on Monday, as yields hit their highest since mid-April. But Gordon says the charts show that the drop in TLT won't stop there, as the ETF has a "pretty good ceiling in place around the $124 mark." Gordon points out that since mid-December, TLT hasn't managed to hold above the $124 level; Monday's drop to the mid-$122 level, after the TLT rose above $124 on Friday, seems to reinforce the trend.

"We've actually failed on that breakout and it looks like the TLT is starting to drop here," Gordon said Monday on CNBC's "Trading Nation." "As TLT bond prices drop, yields are going up equally and on the opposite side, which is helping the banks."

In fact, the financials-tracking ETF (XLF) rallied more than 2 percent Monday thanks to the fall in bonds. But XLF is still below the $24 level, which Gordon says markets are still "trying to challenge."

Thanks to the move down in bonds, however, there is one group that Gordon believes could lead XLF to the upside. Regional banks have been "outperforming," with the KRE ETF climbing almost 4 percent in the past month, and a further rise in yields would spur the group higher.

"We're seeing the regional banks outperform and again, they're really going to gain from a move up in yields," said Gordon.

That leads Gordon to believe that KRE is worth a buy. "I'm looking to put some long trades on those regional banks as that bond market breakout has failed and it looks like we are risk-on for now," he said.

KRE actually rallied about 2 ½ percent off Monday's drop in bonds. TLT is still up more than 3 percent year to date, but that could change as the ETF keeps falling from what Gordon refers to as the $124 "ceiling."