Energy stocks are roaring—more room to run: Trader

Another day, another high for oil.

The commodity briefly touched its highest level of 2016 on Wednesday after government data showed a fall in production. Crude is now up nearly 14 percent since early January, making energy one of the best performing sectors in that period, having risen nearly 7 percent.

"We've seen quite a recovery in the crude oil market and the underlying stocks in the energy sector are indicating that the uptrend can continue," Todd Gordon told CNBC's "Trading Nation" on Wednesday. And according to Gordon, a breakout in one of the sector's biggest stocks could pave the way for the entire space.

Looking at a chart of Chevron, Gordon noted that resistance around the $90 region has been broken. "Resistance becomes support and that should help push the stock higher," said the founder of and a CNBC contributor. Chevron is the second-largest stock in the XLE, the ETF that tracks energy stocks, with a weighting of nearly 15 percent. "I think we can get through the next zone of resistance around $100," he said.

To play for the next leg higher in Chevron, Gordon purchased the May 100/105 call spread for $1.30. This is a bullish strategy where a trader will buy a call and sell a higher strike call to offset the cost. The goal is for the stock to rise to the strike you are short, or in this case $105 by May expiration. That represents a nearly 8 percent move in the next month.

"Chevron looks solid and set to move above $100 as the oil recovery continues," Gordon said.


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Trader Bios


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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