Why this trade is going to be 'better and better'

Energy stocks have had, well, a lot of energy lately.

The energy sector in the S&P 500 is beating all other sectors this month, up 4.9 percent since the start of June. And, it has gained 13.7 percent in the last three months. But, while the energy sector may have been at full steam, will new investors miss the boat?

"It's not too late to get into energy," said Ari Wald, head of technical analysis at Oppenheimer & Co. "Energy has been one of our favorite sectors [and] it continues to be one of our favorite sectors."

Wald thinks investors should pay attention to the relative value of the Energy Select Sector SPDR ETF (XLE) with the S&P 500 index. "It's really important to look at the relative trend versus the market," he said.

A rise in the XLE relative to the S&P 500 shows the sector outperforming the general index, which it has since the start of the year. "This sector's done well year-to-date," Wald said. "This is just reversing three years of underperformance versus the market. There's ample upside opportunity how we see it. This is a sector we think investors need exposure to at this point in the cycle. We think it goes higher and continues to outperform the market."

Gina Sanchez, founder of Chantico Global, says the fundamentals back the technicals.

"Although part of the story happens to be the price of oil, that's not what's driving this," said Sanchez, a CNBC contributor. "These companies [are] massively cost-cutting and they're becoming more efficient."

Exxon Mobil is expected to cut around $1 billion in costs while Chevron is expected to cut about $2 billion, said Sanchez. "And these guys are throwing off big dividends."

Exxon Mobil's dividend yield is about 2.7 percent and Chevron's paying a dividend yield of roughly 3.2 percent. "Given where Treasurys are right now, that's a great deal," said Sanchez. "These look really good, and that is going to continue. This is just going to become a better and better trade."

To see the full discussion on the energy sector and the XLE, with Wald on the technicals and Sanchez on the fundamentals, watch the above video.

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