The volatility in crude continued Wednesday as the commodity plunged more than 3 percent after hitting a two-week high in the previous session. Oil has staged a remarkable 23 percent comeback from its Aug. 24 low. That rally has helped energy become the best-performing sector in the S&P 500 in the fourth quarter. And according to one top technician, there's even more room to run for oil stocks.
"I think the charts have established a very compelling short-term buy signal," Rich Ross said Wednesday on CNBC's "Trading Nation."
Looking at the OIH, the ETF that tracks oil service stocks, Ross noted that the chart has formed a nice double-bottom base of support. Technicians often view double bottoms as a bullish reversal in trend. "The neckline of this double bottom comes right into current levels here right around $32.50 and that's a key area of resistance right now," added the head of technical analysis at Evercore ISI. "But the bullish base suggests we might just have what it takes to break out here."
Read More Why energy investors can't relax just yet
Furthermore, Ross noted that the OIH has broken its downtrend line that's been in place since last year. "A breakout above this neckline, which also takes out the 200-day moving average, would project a measured upside move to $37," he added. That's more than 15 percent higher than the current trading price of just under $32. "Keep in mind that we broke below the 200-day moving average last September and that created a major sell signal," he said. "Any break above it this time could be a compelling buy."
Want to be a part of the Trading Nation? If you'd like to call into our live Wednesday show, email your name, number and a question to TradingNation@cnbc.com
