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 TradingAnalysis.com 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.

Vote
Vote to see results
Total Votes:

Not a Scientific Survey. Results may not total 100% due to rounding.

Videos

Trades to Watch

Trader Bios

About

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.

Sara Eisen

Sara Eisen joined CNBC in December 2013 as a correspondent, focusing on the global consumer. She is co-anchor of the 10AM ET hour of CNBC's "Squawk on the Street" (M-F, 9AM-11AM ET), broadcast from Post 9 at the New York Stock Exchange.

In March 2018, Eisen was named co-anchor of CNBC's "Power Lunch" (M-F, 1PM-3PM ET), which broadcasts from CNBC Global Headquarters in Englewood Cliffs, N.J.

Read more

Connect