The market has hit a ‘critical level’ and is about to bounce higher, says trader

The market has hit a key point that points to a bounce, says chart-minded trader Todd Gordon.

"We've been tracking this consolidation in the S&P for all of 2018, and I think we've just reached a very critical level," the founder said Tuesday on CNBC's "Trading Nation."

Gordon had previously pointed out that the S&P 500-tracking ETF (SPY) has been in a triangle consolidation for most of 2018. Just a few weeks, ago, Gordon began tracking the lower points of the consolidation and said the rally could be over if the SPY fell below a support line at around $260.

Since then, SPY has managed to hold that support, which just happens to be the ETF's 200-day moving average, leading Gordon to believe it will soon bounce.

"I think there is time to add, to continue up, through this consolidation that has contained all of this year," he said. "We should be able to move on up, retest these old highs at just about the $280 mark."

To play for a bounce, Gordon wants to buy the June monthly 275-strike call and pair that with the sale of the June monthly 280-strike call for about 73 cents, or $73 per options spread. Should SPY close above $280, Gordon could make $427 on the trade.

Markets were choppy on Tuesday leading up to and following President Donald Trump's announcement that the U.S. would pull out of the Iran deal.


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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.

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

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