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