It’s time to bet against crude oil, and here’s how to do it: Technical trader

Crude's five-day win streak came to an end on Wednesday, and one trader believes the drop is a sign that oil's comeback is done.

Looking at the oil-tracking ETF USO, Todd Gordon of TradingAnalysis.com says the chart is "moving into technical resistance," implying that further upside for crude may be hard to come by.

"If we were to connect the most recent highs, you can see that crude oil has got some overhead resistance or ceiling to contend with right at about the $10.75 mark here in the USO," Gordon said Wednesday on CNBC's "Trading Nation," as the ETF traded at about $10.60.

And even if USO had more room to run, it would only reach the $11 mark, according to Gordon. The trader got to the $11 level by using a Fibonacci retracement technique to identify "the end of correction" for oil, determining that the commodity would only hit the 75 percent retracement mark from its May 8 low before falling.

To play for a short-term drop in USO, Gordon is buying the June 9 weekly 11-strike put and selling the June 9 weekly 10-strike put for 43 cents, or $43 per options spread. If USO were to keep climbing and close above $11 on June 9 expiration, the $43 Gordon paid to make the trade would be the amount he would lose.

If USO were to close below $10.57 on June 9, however, Gordon would make money on the trade— all the way up to a maximum reward of $57, which the trade will return should USO close at or below $10 on expiration.

WTI crude oil is up 4 percent from last week, remaining above $51 even after Wednesday's drop.

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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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