There’s a ‘macro storm’ brewing that’s about to send one bank to new all-time highs: Technical analyst

There's one big bank that's about to breakout: Trader

Todd Gordon is seeing something in the markets that he says is about to drive JPMorgan to new record highs.

The financials sector is trading at 10-year highs. The TradingAnalysis.com founder says the recent rally in bond yields is reinforcing the surge in big banks, and there are hints of even more upside to come.

"Financials are in breakout mode here, and they're being accompanied by higher U.S. yields," he said Thursday on CNBC's "Trading Nation." "That's what we'd like to see: As those yields on the longer end of the curve move up, that net interest margin — which is the ability to borrow in the short-term, lend in the long-term — increases their profit margins."

And there's a "strong correlation" between yields and one bank in particular: JPMorgan.

Gordon noted that the bank and the U.S. 10-year yield have traded in tandem over the last year, and JPMorgan's recent outperformance versus the 10-year leads Gordon to believe that "the banks are foretelling higher yields," which will ultimately boost financials.

The yield on the 10-year Treasury recently hit a 7-month high as the U.S. economy continues to pick up steam and investors price in the hopes of tax reform. Bond prices and yields move inversely to each other.

What's more, Gordon is seeing nascent signs of inflation in the form of rising commodity prices. Inflation usually means lower bond prices and, as a result, higher yields. A "macro storm" could ensue that could push rates even higher, which, according to Gordon, would push shares of bank stocks even higher.

Since the "Dimon bottom," where the bank's CEO Jamie Dimon bought 500,000 shares of his own company, JPMorgan has surged 92 percent and gained $164 billion in market cap.

What's more, Gordon says JPMorgan is in the midst of a technically constructive formation that could mean more gains to come. Specifically, he sees JPMorgan shares entering the "third wave" of the Elliott Wave theory, which maintains that a stock will see five "waves" before it enters a bigger pullback. Gordon believes that the third wave normally signals the biggest move up, and based on the distance of the past two waves, he sees an even bigger rally for that third wave.

"Traditionally, that third wave will press to a multiple higher than the distance traveled in one, so that points to $105, possibly even $110," he said.

To take advantage of this possible rally, Gordon is buying the December monthly 100-strike calls and selling the December 105-strike calls for a total of $2.39. In this trade, Gordon sees profits if JPMorgan shares rise above $102.39 by December expiration.

Shares of JPMorgan are currently up 18 percent year to date.