Clorox (CLX) - Get Report stock jumped $3.76, or 3%, Monday after the maker of household products posted better-than-expected earnings. The earnings rally was probably exaggerated, and smart investors should be able profit by trading on the coming correction lower.

The stock chart for Clorox below reveals at least three signals forecasting reversal.

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First is the large price gap to the upside and the formation of a spinning top. This is a one-session candlestick. This kind of pattern can indicate different things, based upon the specific context in which it's found. In this case, it looks like a bearish reversal.

This is confirmed by two nonprice signals. First is a double volume spike. In the past six months, spikes have occurred, but a two-day spike formation is very unusual. Second is the move of momentum into overbought territory as measured by the relative strength index. A look back over recent months reveals that when the RSI has moved above 70, it rarely stays there for long.

Anticipating a reversal, what trading actions make sense? The November 125 put option closed on Monday with an ask of 1.55. Adding $9 for trading expenses, the total cost for buying this put is $164. With two and a half weeks to go before expiration, this seems like a reasonable risk.

This article is commentary by an independent contributor. At the time of publication, the author held no positions in the stocks mentioned.

Besides blogging at TheStreet.com, Michael Thomsett also blogs at theCBOE Options Huband several other sites. He is author of 11 options books and has been trading options for 35 years.  Thomsett Publishing Website