Crude settled down 1.5 percent Wednesday after surging to a 10-week high early in the session. Oil is now up 28 percent from its late August low, and one top technician insists the rally is just getting started.
"The big story in the fourth quarter thus far is this surge in energy," Rich Ross said Wednesday on CNBC's "Trading Nation." Energy is the best-performing S&P sector so far this quarter, up more than 10 percent as oil has rallied 7 percent in the same period. "I don't think it's too late to take advantage of this recent surge and play for an extension of this move."
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Looking at a chart of the OIH, the ETF that tracks oil service stocks, Ross, head of technical analysis at Evercore ISI, noted a recent completion of a "very bullish double bottom" formation. This is a pattern technical analysts often recognize as a reversal in trend, where a stock or ETF will fall to a low, retest that low and then move higher.
"Admittedly we saw a similar double bottom earlier this year that produced a nice rally but it ultimately failed," said Ross, whose work was recently recognized by Institutional Investor's 2015 All-America Research Team. "At the very least [this time] I think we are set up for a tactical move coming off this double bottom."
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For Ross, there are two key levels to watch on the chart: resistance, which comes in at $32, and then the 200-day moving average around $34.
"I think we will retest $32 and a break above that should get us to that moving average," he said. "We haven't seen the north side of the 200-day for over a year, so clearly a break above $34 is a game changer." That would be an 8 percent move from the Wednesday afternoon trading price of around $31.40.
"I think crude oil and the OIH by extension have what it takes to move higher from here," added Ross. "Take advantage of this early quarter strength."
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