Tesla is on a tear this year, and trader Todd Gordon says the shares are about to rev up to even more record highs.
The automaker hit another all-time record on Thursday, rallying amid the announcement of a possible production plant agreement with Shanghai and a Recode report that the company is looking to create its own streaming service.
But the charts are also pointing to an even bigger breakout, says Gordon, founder of TradingAnalysis.com.
"Tesla just continues to show amazing relative strength as the broader market is kind of hanging out," he said Thursday on CNBC's "Trading Nation."
First, on a chart of Tesla dating to 2013, Gordon points out that the stock has broken out from a "base" that's been in place since 2014. That leads him to believe that the momentum is still suggesting a further move up.
On a shorter-term basis, Gordon sees a "bull flag" forming in the past few days for Tesla, a pattern that he says suggests the stock is seeing a "short-term consolidation before that next wave of buyers comes in." And Gordon believes that when those buyers come in, Tesla could reach $400, which is about 5 percent above current levels.
While Gordon wants to bet on a rally for Tesla up to $400 using a bullish call spread, the relatively high price of options means he also wants to sell a put spread to cut down on the total cost of his trade.
Specifically, Gordon is buying the July 14 weekly 395-strike call while also selling the July 14 weekly 400-strike call for a total of $1.55 per share. At the same time, Gordon is selling the July 14 weekly 365-strike put while also buying the July 14 weekly 370-strike put for a credit of $1.83 per share.
This trade theoretically makes money so long as Tesla shares close above $369.72 on expiration. But maximum profits come at the $400 level for the stock, which closed Thursday at $382.61.
"If the stock were to [close below $370 on July 14 expiration], I'm going to cut both trades, get out, and contain any risk that's still on the table," said Gordon.
Tesla has already soared 79 percent this year.