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Energy rally has more room to run and these four stocks should benefit, Piper Sandler says

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What to watch in the energy trade as OPEC+ meets, according to traders

The energy rally rolls on.

The XLE energy ETF has raced ahead of the broader market again in the past month, rallying nearly 13% against the S&P 500's 4% drop, as global demand for oil outpaces its supply. An output decision from OPEC+ when the bloc meets Monday could be the next big upside or downside catalyst for the sector.

Craig Johnson, chief market technician at Piper Sandler, remains bullish on the sector. 

"It's very clear, any sort of move from here is likely to go up to $65, and then you're going to see a topside breakout," he told CNBC's "Trading Nation" on Friday. "You've made a beautiful higher low on a multiyear basis when you look at that XLE chart."

The XLE ETF closed Friday at $53.84. A move to $65 implies 21% upside.

Johnson said that, although many portfolio managers tend to undervalue energy companies, the global environment and technical setup for the sector make it a strong bet.

"These portfolio managers aren't going to be able to avoid this space for long," he said. "For the traders out there today, I think you've got to get ahead of the move."

He suggested that traders buy Devon Energy, Range Resources, EOG Resources and Pioneer Natural Resources.

"These are all stocks that probably should be bought, because they are going to definitely benefit going forward," he added. 

In the same "Trading Nation" interview, Michael Bapis, managing director of Vios Advisors at Rockefeller Capital, also made his case for the sector. 

"The energy sector got slammed during the pandemic," he said. "They're also going to benefit from the recovery." 

From a fundamental standpoint, Bapis said, many of these energy companies have low price-to-earnings ratios and high dividend yields, which make them strong plays, especially in the current growth-to-value rotation environment. 

The sector will also benefit as winter approaches and demand for natural gas and oil ramp even higher, thus exacerbating the current supply and demand imbalances, Bapis said.

"I see the recovery lasting," he said, adding "if we look 12 to 18 months out, you'll see this sector higher."

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