Energy stocks just notched their second-best trading day of the year.
The S&P energy sector rallied 3 percent Tuesday as crude oil snapped its five-day losing streak and bounced off a four-month low. And according to one top technician, the rally is just getting started.
"We came into [this rally] extremely oversold, about the most oversold we've seen since early April," Jonathan Krinsky said Tuesday on CNBC's "Futures Now." The energy sector is currently in the midst of a 12-week losing streak, which by Krinsky's work is the worst in its plus-25-year history.
Looking at the Alerian MLP Index, which tracks large- and mid-cap energy names, Krinsky noted that the index was trading at its "widest spread to its 200-day moving average since 2009." And for Krinsky, chief market technician at MKM Partners, the rebound in crude and the extreme oversold conditions set the stage for a "nice tradeable bounce." He believes energy stocks could rally as much as 7 percent from current levels.
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"If we see a close above $48.20 in crude oil that could be the signal to cover some shorts and see some follow through on the upside," said Krinsky. He expects the commodity to rise to the high $40 to low $50 range over the next couple of days. Crude oil settled at $47.98 on Tuesday.
Despite the potential for a near-term buying opportunity, Krinsky said the "structural nature of energy remains firmly bearish," and that it could take "many weeks, months or more likely quarters" to reverse course. "The old saying 'oversold doesn't mean over' should resonate high here," he added.