Technical analyst Todd Gordon is bearish on the market, but there's one stock he can't resist.
Nvidia is up about 52 percent year to date, although it has had a recent setback. The TradingAnalysis.com founder says the charts are hinting at a possible breakout for semiconductors as a group, and the chipmaker is particularly well positioned for a comeback.
"[The semiconductor ETF (SMH)] is hanging inside of this little range here that we've seen for the summer, and it's possible that we're going to break higher, " Gordon said Tuesday on CNBC's "Trading Nation. " "The vehicle of choice in the chips, no surprise here, is going to be Nvidia."
Shares of Nvidia are down almost 7 percent from the all-time highs hit earlier this month. Gordon points to an "inverse head and shoulders" pattern that he says is suggesting a bullish reversal for the stock. The trader believes that the "shoulders" of the pattern, which are sitting near $160, are forming a "support shelf" that could send Nvidia back above $170.
As a result, Gordon wants to buy the September monthly 165-strike calls and pair that with the sale of the September monthly 170-strike calls for a total of $1.62, or $162 per options spread. This means that if Nvidia were to close below $165 on the Sept. 15 expiration date, Gordon would lose $162, the premium he paid to make the trade.
On the other hand, if Nvidia closes above $170 on Sept. 15, Gordon stands to gain a maximum reward of $338 on the trade.
However, despite the attractive risk reward, Gordon does establish a stop for himself in order to mitigate risk.
"If [the premium] gets cut to about $80, let's cut the trade, it's obviously not working," he said.
The SMH is currently up 20 percent this year, meaning that Nvidia is far outperforming the group.