Energy stocks could be due for an even bigger rally

Energy stocks have soared this month, and Todd Gordon, a technician and founder of TradingAnalysis.com, says an even bigger rally is in store for the sector.

The XLE energy-tracking ETF is up almost 7 percent in December, with energy stocks also getting a boost Tuesday as oil rallied to hit $60. From a technical standpoint, Gordon says that XLE is looking like a great buy for investors.

Aside from a head and shoulders pattern, which Gordon sees as a bullish sign, XLE also "looks like [it] wants to go up and retest these old highs [up to the] $75 region," he said Friday on the "Trading Nation" segment of CNBC's "Power Lunch."

Gordon is looking at EOG Resources, in particular, for a big bounce. "[EOG has] the same kind of pattern, an inverse head and shoulders, but you can see it's just escalating and showing some really good relative strength."

Boris Schlossberg, managing director of FX strategy at BK Asset Management, likes one bullish trade on XLE in particular given that both the tax overhaul and rising oil prices are benefiting the sector.

"I actually like the pair trade. Long XLE and short SPDRs on a relative basis, because if there's a correction in the market, XLE's going to held bid and it's going to be an interesting trade," he said on "Power Lunch." "Also, it covers the carry because the dividend in the XLE is a bigger dividend that the SPDRs."

On Tuesday, XLE was at $72.55 in late trading.

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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.

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