Trading Nation

One underperforming sector is making a stealthy comeback this month

Actual oil price still on downward trajectory: Chantico Global's Sanchez

The worst-performing sector this year is showing signs of life.

Energy stocks have roared higher in the early start to the month with the XLE energy ETF adding nearly 6% in just three sessions. The sector is also the best performer on the S&P 500 in November.

Mark Newton, founder of Newton Advisors, says the rally could just be getting started.

"You're approaching the time of year when you do tend to see mean reversion to the laggards … so with energy being the worst performer, you could start to see a shift into energy between now and the early part of next year," Newton said Tuesday on CNBC's "Trading Nation."

The best way to ride a comeback could be the XOP oil & gas exploration and production ETF, says Newton. It closed Tuesday's trading at $22.94.

"This would be one I would buy that really could benefit from a further boost in WTI and Brent crude. Right near $24 is our really long-term trend line going back since the early part of the year. Hitting above that really could allow this to accelerate," said Newton.

The XOP ETF — whose top components include Marathon Petroleum, PBF and Murphy Oil — has raced 9% higher this month. However, it is down 40% from a 52-week high set roughly a year ago.

Gina Sanchez, CEO of Chantico Global, is not as convinced that energy is back.

"Energy has definitely been through a really tough time given sort of all the expansion in supply because of technological changes in the industry. However, you still have a little bit more to go, I think, in the downward trend in oil overall," Sanchez said during the same segment.

West Texas Intermediate crude oil has surged 26% this year, though it has pulled back 14% from an April high.

"While I think that the value rotation will start to favor value stocks and some of these companies are oversold relative to the oil price, the actual oil price is probably still on a downward trajectory," said Sanchez.