This year’s hottest Dow stock has more room to run: Technical analyst

With a 64 percent year-to-date rally, Boeing is by far the best performer in the Dow Jones industrial average. And Todd Gordon of says the aircraft manufacturer is about to head even higher.

Tuesday on CNBC's "Trading Nation," Gordon took a look at a chart of Boeing and pointed to two distinct gaps that occurred at the end of July amid a huge post-earnings surge. The stock, according to Gordon, did drop back down to fill in the smaller of the two gaps before it continued to follow a "powerful uptrend." But the bigger of the two gaps remains "unfilled."

"That's what you call a continuation gap, and generally that's a bullish signal," said Gordon, a trader and technical analyst. "So right now heading into the next earnings report, which is October 31, we have a little bit of a consolidation that looks like it's set to break higher."

For that reason, Gordon said the stock will stay above the $255 level, which is above where it closed on Tuesday.

Since Boeing options have been generally rising in value, Gordon wants to make his bullish bet by selling put options.

Specifically, he is selling the Oct. 27 weekly 255-strike put and buying the Oct. 27 weekly 250-strike put for a total credit of $1.60 per share. This means that if Boeing closes above $255 on Oct. 27 expiration, then Gordon would make a maximum profit of $160 on the trade.

But if Boeing closes below $250 on Oct. 27 expiration, then Gordon stands to lose his maximum of $340. The skewed risk-reward, however, is mitigated by the fact that Boeing is already at the $255 level set by Gordon. Plus, the trader has also established a point at which to get out of the trade.

"If we trade back below $152, towards the lower end of that range, let's close out of the trade and we won't likely face a max $340 loss," he explained.


Trades to Watch

Trader Bios


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

Read more