As crude oil prices have slid, energy stocks have badly outperformed the rest of the market. But according to Carter Worth of Sterne Agee, that could actually present an attractive opportunity to buy into the energy sector.
As of Monday morning, crude oil futures are down 13 percent from the intraday high they made back in June. That hasn't been good for the S&P energy sector. The only sector that fell last week, the energy sector has also been the worst-performing sector over the past month, underperforming the S&P 500 by 2.5 percent.
But Worth, Sterne Agee's chief market technician, has spotted an interesting trend. Looking back 25 years, he notes that there have been 203 instances when WTI crude oil has fallen more than 15 percent over 12 weeks, and the S&P energy sector has also underperformed during that period. So what happened after that? Over the month that followed, the energy sector actually outperformed the S&P by 0.41 percent on average. Over the three months that followed, the energy sector tended to outperform by 1.99 percent. And over a five-month time period, the energy sector has beaten the broader market by 2.63 percent.
"That's statistically significant, no other way to categorize it," Worth said. "And we think that's an important backdrop here, because you've had a nice sell-off in crude."