Just last week, TradingAnalysis.com founder Todd Gordon correctly called for an oil rally, but he now believes the crude comeback is over.
Gordon initially predicted that the oil-tracking ETF USO could hit as high as $11, which would take it back to April highs. Since his July 25 call, USO has risen 3 percent as oil rallied, but now Gordon thinks it's time to reverse his long position in USO.
"This EIA data that we saw ... was actually a little bearish for the price," he said Wednesday on CNBC's "Trading Nation." "Combined with the technical position of the market, it's time to go the other way, so we're actually trading this range in here."
There are two technical indicators that have led Gordon to bet against USO. First, he sees a "downtrend resistance" near $10.25 that USO broke through, but then fell back below. Second, the relative strength index, or RSI of USO, shows that every time the RSI has risen to around 70, indicating a strong momentum move up, it has reversed, essentially losing momentum.
"There's certainly technical precedence to say that we're in overbought territory," Gordon explains.
As a result, Gordon wants to buy the August monthly 10.5-strike put for a total of 49 cents, or $49 per options contract, which expires August 18. This is a bearish bet that USO will close below $10.01 by August 18.
"A logical take-profits zone [in this trade] would be back into the consolidation area, which actually forms the breakout right at around $9.50," Gordon added. "That's going to be your downside technical target for crude oil."
USO is down over 1 percent this week thanks to the move down in crude.