Oil stocks have done something extraordinary: Trader

Big oil has lost big money for investors.

In the past year, as crude prices have fallen more than 55 percent, the nine biggest Western oil companies have shed a combined $400 billion in market cap, according to data pulled by FactSet. But despite the staggering decline, one expert sees rare opportunity in the space.

"It's important to remember that going back over the last 20 years in the equity market, whenever you have a secular change such as technology in 2000, financials in 2007 and 2008 and now energy, it takes about two years for a real capitulation washout," Larry McDonald said Wednesday on CNBC's "Power Lunch." Energy stocks have been steadily declining since June 2014.

But according to McDonald, while the bottoming process plays out over the next year or so, there are "fantastic opportunities" for short-term rallies. "If you look back in all of those sectors you had rallies of 10 to 30 percent only to fail and make new lows," added the head of U.S. macro strategies group at Societe Generale. Most recently, crude oil rallied 47 percent from its March low to its May high, only to fall back to new lows.

Read MoreStocks recover from sharp losses as oil rise boosts energy

In addition to the potential for pop-up rallies, McDonald said energy stocks could be a place for yield hunters. "Something that could hold them up is the 30-year treasury which is trading around 2.8 percent while oil names like Exxon and Conoco have a dividend yield of anywhere from 3.8 percent to 6 percent," he said. "At some point the bond equality of the dividends will start to support some these equities."

From a pure chart perspective, technical analyst Todd Gordon sees no reason to pile into the energy space. "I think the trend is lower," Gordon said in a "Trading Nation" segment.

Looking at Exxon Mobil specifically, Gordon noted that in addition to losing an "amazing amount" of its market cap, the stock is extremely weak. "We broke support at the $85 market and its formed resistance," said the founder of TradingAnalysis.com. For Gordon, the next level of support comes in around $75 a share. Exxon closed Wednesday at $78.79.

"Any move up to $82 to $83 should be viewed as a sellable point," he added. "Ultimately I think we break lower along with crude oil."

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Trading Nation is a multimedia financial news program that shows investors and traders how to use the news of the day to their advantage. This is where experts from across the financial world – including macro strategists, technical analysts, stock-pickers, and traders who specialize in options, currencies, and fixed income – come together to find the best ways to capitalize on recent developments in the market. Trading Nation: Where headlines become opportunities.

Michael Santoli

Michael Santoli joined CNBC in October 2015 as a Senior Markets Commentator, based at the network's Global Headquarters in Englewood Cliffs, N.J.  Santoli brings his extensive markets expertise to CNBC's Business Day programming, with a regular appearance on CNBC's “Closing Bell (M-F, 3PM-5PM ET).   In addition, he contributes to CNBCand CNBC PRO, writing regular articles and creating original digital videos.

Previously, Santoli was a Senior Columnist at Yahoo Finance, where he wrote analysis and commentary on the stock market, corporate news and the economy. He also appeared on Yahoo Finance video programs, where he offered insights on the most important business stories of the day, and was a regular contributor to CNBC and other networks.

Follow Michael Santoli on Twitter @michaelsantoli

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