Oil Bears Have Lost Their Bite – It's Time for Energy Stocks to Soar

Nineteen measly points.

That’s all that separates the S&P 500 from topping its all-time closing highs. A routine move of less than 1% will get the Big Board over the hump—and it could happen as soon as this afternoon.

But not all stocks are playing nice…

The biotech sector rattled traders yesterday with another whipsaw session. The iShares Nasdaq Biotech ETF posted its fourth reversal day in a row, sinking to the red for the week and dragging the entire Nasdaq down with it. The culprit? A multiple sclerosis therapy from industry giant Biogen (NASDAQ:BIIB) flunked its study goals. That was enough to drag down the entire sector for the day.

Even within spitting distance of new highs, the market will continue to throw you curve balls. That’s why it’s imperative to know which stocks to buy as the major averages march toward their highs.

So while the media distracts the masses with presidential primaries and the Brexit vote, you should turn your attention to the energy sector.

Oil prices finished Tuesday’s session above $50 a barrel. That’s the first time oil has closed above the $50 barrier since last July. U.S. stockpiles are down and China demand is stronger than anticipated, according to MarketWatch. This bullish data helped catalyze the move. And we’re seeing more positive follow-through this morning. Crude is topping $51 in early trade. If the move holds, it will be the third day of significant gains for black gold.

Now that Mr. Market has declawed the oil bears, it’s time for energy stocks to soar.

Oil services stocks kicked off the week with an insanely strong move out of the gate Monday morning. The VanEck Vectors Oil Services ETF has risen nearly 10% on strong volume since Friday’s close. As of this morning, this group of stocks is posting new year-to-date highs. The oil services sector has gone from laggard to leader in just 48 hours…

OilServiceSurge-DR

The market rally we’ve witnessed over the past few weeks continues to feed off of the energy sector’s red-hot performance. That’s a welcome change from the past 18 months—when energy names acted as the market’s cement shoes during the oil meltdown.

Of course, this also means that the entire energy sector is ripe with fantastic trade setups. The independent oil and gas firms took the baton from the oil services firms yesterday. All but one independent oil and gas stock in the S&P 500 finished the day well in the green. Across the market, 20 of these stocks posted gains of 4% or more on Tuesday.

A small handful of these stocks have even doubled from their February lows. Remember the forgotten law of the stock market we’ve hammered home this week: stocks that have already doubled are more likely double again.

You’ll find plenty of trading options in the oil and gas space this week. It’s a great way to play one of the market’s leading sectors as the major averages fight for new highs…

Sincerely,

Greg Guenthner
for The Daily Reckoning

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