Energy stocks are on their longest winning streak in 12 years, and there's more room to run

The XLE energy ETF just posted its 10th straight day of gains, its longest daily winning streak since 2006. Some see even more room to run.

"We're high conviction overweight," Mark Tepper, president and founder of Strategic Wealth Partners, told CNBC's "Trading Nation" on Thursday. "You look at these escalating geopolitical risks with Iran and that could lead to oil supply issues down the road, so that's obviously going to add a premium to prices."

Oil prices have been on a tear over the past month as the possibility rose of sanctions against Iran. President Donald Trump announced last week that he was withdrawing from the Iran nuclear deal and that he would restore sanctions against the Middle Eastern country. As of Thursday, West Texas Intermediate crude had risen 2 percent since then.

"Look at the difference between oil price appreciation versus the XLE price appreciation," said Tepper. "Oil is up 40 to 50 percent year over year and it's up over 20 percent year to date and we do see an additional 10 to 15 percent upside before the end of the year. Energy stocks haven't done quite as well. The XLE is up 9 percent this year and it's up 17 percent year over year."

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Brent crude oil traded above $80 a barrel on Thursday for the first time since November 2014. WTI ended at $71.49 a barrel, levels not seen in more than three years. Friday morning, Brent was at $79.62 and WTI was $71.56. The energy sector is the second-best performer on the S&P 500 this year.

Another long-time energy bull is beginning to lighten his exposure to the sector as investors pile into the space.

"We've been pounding the table on the XLE and the energy space," Larry McDonald, editor of the Bear Traps Report, said on Thursday's "Trading Nation." "The awareness level of the bull case is very, very well known right now. Extreme overbought conditions … so we've been selling shares this week and we're lightening up on your energy position."

The XLE's relative strength index has spiked to above 80, suggesting overbought conditions. A reading above 70 typically separates normal from overbought levels. The XOP S&P oil and gas exploration and production ETF has an RSI of 78.

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Trading Nation is a multimedia financial news program that shows investors and traders how to use the news of the day to their advantage. This is where experts from across the financial world – including macro strategists, technical analysts, stock-pickers, and traders who specialize in options, currencies, and fixed income – come together to find the best ways to capitalize on recent developments in the market. Trading Nation: Where headlines become opportunities.

Sara Eisen joined CNBC in December 2013 as a correspondent, focusing on the global consumer. She is co-anchor of the 10AM ET hour of CNBC's "Squawk on the Street" (M-F, 9AM-11AM ET), broadcast from Post 9 at the New York Stock Exchange.

In March 2018, Eisen was named co-anchor of CNBC's "Power Lunch" (M-F, 1PM-3PM ET), which broadcasts from CNBC Global Headquarters in Englewood Cliffs, N.J.

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