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Lululemon could be about to resume its rally. A trader lays out a way to catch the upside

Onetime high flyer Lululemon has run into trouble over the past month.

The stock has fallen 17% from a Sept. 2 high with losses accelerating even after an earnings report that topped analysts' estimates. The stock remains more than 40% higher for the year.

Todd Gordon, founder of TradingAnalysis.com, says strong demand should help Lululemon recapture upside momentum.

"Lulu is well positioned to benefit from the work-from-home, stay-at-home environment. Comfort clothes are really, I think, second to none … But I also think they'll benefit if and when the work-from-home, stay-at-home environment ends, because gyms and yoga classes will open back up and the demand will stay strong," Gordon told CNBC's "Trading Nation" on Thursday.

He sees strength on three fronts: e-commerce, international expansion and its acquisition of Mirror, a augmented reality interactive fitness company.

"They're looking to grow at a compound rate of 40% per year in China and … their e-commerce is also a big focus, their margins are a lot better on the e-commerce side compared to their in-store sales," said Gordon.

Lululemon reported a 157% increase in online sales for its quarter ended Aug. 2. In-store sales fell 51%. As for Mirror, Gordon anticipates the offering could help boost sales for its workout clothes.

Lululemon gapped down below $300 in mid-September. Gordon now expects the stock to close that gap to move back toward $360. To capture that move, he is buying a 340 call with Nov. 6 expiration and selling the 360 call. At the time of filming Thursday, that $20 call spread cost $7.80, or $780, with maximum profit of $2,000 — giving a maximum potential gain of roughly $1,200.

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