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There’s something in the chart that tells me oil is about to surge: Trader

Despite a somewhat quiet few weeks for oil, trader Todd Gordon says there's one trend in the charts that's signaling a bounce for the commodity.

The founder of TradingAnalysis.com is looking at a triangle pattern in particular that has formed in the chart of USO, the exchange-traded fund that tracks oil. Gordon noted that while the ETF has been in an uptrend since the summer, it's about to break the consolidation that he sees near $11.50 in USO.

"This is a nice triangle, and usually what happens is post-triangle, [the next move will] be in the direction of the trend prior to the current trend," he said Tuesday on CNBC's "Trading Nation." "So that means the direction in which you'd expect this triangle to break would be on the upside, because we were in an uptrend prior to the formation of the triangle."

Because of his trend prediction, Gordon believes that USO could actually rally up to $12.50 in the early part of 2018. That would represent a more than two-year high for the ETF.

To play for the move higher, Gordon recommended buying the January 11-strike calls for about 54 cents, or $54 per options contract. In order to make money on the trade, USO would have to close above $11.54 on Jan. 19.

But if USO drops, Gordon wants to make sure that he can still get out of the trade and not lose too much of the $54 he paid.

"If that 54 cents in premium that we put out there gets cut in half down to about 26 or 27 cents, let's cut the trade, contain the risk and move on," he said. "Otherwise it looks like we should be able to move on up."

Despite surging from year-to-date lows in June, USO is still down more than 1 percent this year.

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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.

Brian Sullivan

Brian Sullivan is co-anchor of CNBC's "Power Lunch" (M-F,1PM-3PM ET), one of the network's longest running programs, as well as the host of the daily investing program "Trading Nation." He is also a frequent guest on MSNBC's "Morning Joe" and other NBC properties.

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