These two big oil names are about to break out: Trader

The energy sector is on track for its second positive week in a row, and some traders are betting on even more gains for two names in the space.

As the broader market has sold off in recent weeks, energy has managed to stay afloat. The energy sector is just one of three in the S&P higher over the last month. According to "Options Action" trader Mike Khouw of Optimize Advisors, the rally sparked an unusual amount of trading activity in Chevron and Halliburton.

"Chevron, one of the biggest integrated oil companies, saw two times the average daily call volume [on Thursday]," Khouw told CNBC's "Fast Money" on Thursday. Chevron is the second-largest holding in the energy ETF but has fallen more than 6 percent so far this year and is now down more than 13 percent from its January highs.

However, a notable trade in the options market implied shares of the California-based oil company could be on the road to recovery. On Thursday, a number of traders bought the April weekly 120 calls for about 65 cents per contract. According to Khouw, these bets suggest "about a 3 percent gain" for shares of Chevron by next Friday.

Thursday's trading also revealed a surge in bullish activity for Halliburton. Khouw, who favors the name best out of the oil service providers, said call options nearly doubled that of puts. He also pointed out a block of traders who bought the June 50 calls for an average of $1.50 per contract. The trade suggests shares of Halliburton will rise above $51.50 by June, a nearly 10 percent gain from their current levels.

Khouw also noted that while the recent rally in crude prices has been primarily fueling optimism for the energy stocks, oil service providers such as Chevron and Halliburton will "be strong regardless."

Shares of Chevron and Halliburton were both trading lower early Friday afternoon, with Chevron trading around $115.14 and Halliburton at $46.91.

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  • Melissa Lee

    Melissa Lee is the host of CNBC's “Fast Money” and “Options Action.”

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