The energy sector might be the only value in the market right now, and today I’ve got a bullish play on independent energy company Apache Corporation (NYSE:APA).

In the face of new all-time highs on Wednesday, my indicators are giving sell signals this week, a downgrade from last week’s bullish-to-neutral readings.

With coronavirus cases still on the rise and market breadth continuing to show weakness, I wouldn’t be surprised to see some further selling in the near-term.

But the bulls haven’t given up yet. We saw some selling early in yesterday’s trading session. However, most of the losses were recovered as the bulls came in to buy the dip mid-day.

The S&P 500 traded down to support around the 3,340 level before rallying into the close to end at 3,373.23.

My regular readers know I don’t want to buck the tape, which is to say, I never want to go against the action in the market. Though the market looks ready to open lower, investors could come in to buy the dip again today.

As I said above, one place we can turn for bullish plays in this overextended market is the beaten-down energy sector.

Oil and Gold

After falling below near-term support at the $50 per barrel level on coronavirus fears, crude oil has recovered slightly and is currently hovering in the $53 per barrel area.

If that wasn’t the bottom in oil prices, I’d say it’s close to finding one. And one indicator that’s giving me confidence in a bounce for oil is what I’m seeing in gold.

Weekly Charts of Crude Oil Futures (CL1!, Top) & Gold (Bottom) — Chart Source: TradingView

As you can see in the weekly charts above, with crude oil futures on top and gold on bottom, there is an interesting pattern at play between these two assets.

If you look closely, you’ll see that the action in gold tends to lead the action in oil. In late 2016, gold declined, which was followed by a decline in oil in early 2017.

Then, gold began to recover at the start of 2017, and oil started to rally about six months later. Gold then dropped in early 2018, which was followed by a drop in oil at the end of the year.

What’s most interesting is what’s happening right now, though. Gold has been rallying since early 2019 and just hit a seven-year high, while oil has remained essentially flat.

If the pattern observed between these two asset classes holds throughout the remainder of 2020, I would expect to see oil rally in the coming months.

APA’s Overlooked Success in Suriname

In January, APA announced it had discovered oil in offshore Suriname, and as William White said at the time, its price “gushed” higher.

In the chart below, you can see that the stock has since come back down. Part of APA’s drop is likely due to the COVID-19 outbreak. The outbreak hurts China’s economy, which reduces the country’s demand for oil, which pushes prices lower. APA isn’t immune to that chain reaction.

Daily Chart of Apache Corporation (APA) — Chart Source: TradingView

However, in December 2019, APA prices took a big hit because its offshore well in Suriname hadn’t found any new oil. The company’s recent success, therefore, was a major win. The COVID-19 outbreak cut APA’s bullishness short, but as investors look for a way into the energy sector, this stock is set up as an excellent candidate.

APA needs to overcome resistance at $29.50. With its earnings report scheduled for release next week, it has a chance to remind investors of its recent successes. If it performs well enough and offers decent guidance, it could break above $29 and move on to challenge its January highs.

Buy to open the Apache Corporation (APA) April 17th $30 Calls (APA200417C00030000) at $1.70 or lower.

InvestorPlace advisor Ken Trester also brings you Power Options Weekly, which delivers 5 new options trades and his latest trading advice to you each Friday. Trester has been trading options since the first exchanges opened in 1973 with a winning streak that goes back to 1984 with money-doubling average annual profits since 1990.