Energy has been struggling this year, sinking 13 percent, but one top technician is making a contrarian call on the beaten-down sector.
After multiple calls to sell energy, Carter Worth of Cornerstone Macro says that the charts are now flashing a buy sign.
Energy has “come a long way, and at some point you do have mean reversion, and I’m going to make that bet,” Worth said Friday on CNBC’s “Options Action.”
The S&P 500 Energy sector is still the second worst performing sector this year, and up until recently the chart was made up of “a well-defined series of lower highs, lower lows,” Worth said. “But now if you draw trends, what we know is that it is right up against the trend line, and my thinking here now is that for the first time in exactly seven months, we’re going to poke up above the top.”
Furthermore, while analyzing the energy sector’s performance against the broader market, Worth noted that “we made new lows on the actual price, but we didn’t make new lows relative [to the market]. Even as it’s gone lower absolute, it’s starting to outperform the market,” Worth said.
“I think it’s the beginning of something … the bet is that you’re going to pop. I think you’ve got a good bet here for the first time in a long time to make some money on the long side of [energy].”
Energy was the second best performing sector in midday trading Monday.