The great thing about the stock market is that it provides many ways for traders to express their opinions. And for all traders believing, as I do, that energy stocks are in the midst of a rebound, there are ways to participate that suit everyone’s convictions and risk tolerance.

For those looking for total return — capital gains and dividends — a more stable big-cap name would be the right choice.

#-ad_banner-#And for those who are a bit more contrarian and able to handle higher levels of risk, what could be better than a smaller stock in an extremely out-of-favor subsector?

Let’s dig in.

The first stock is integrated international oil giant BP (NYSE: BP). The former British Petroleum is still feeling the stain on its reputation from the 2010 Deepwater Horizon disaster in the Gulf of Mexico, and its stock price reflects it. In fact, it trades well below where it was before the accident. 

But there is good news in that the technicals now point to a short-term rally. I am not suggesting BP will head back to pre-incident highs, but it is poised to make up some ground relative to its sector and the market as a whole.

For starters, the stock has pieced together a set of higher highs and higher lows since December. And that has caused the 50-day moving average to turn higher, along with a slight performance edge over the broader market during that time frame.

This week, BP challenged resistance from the February high at $42.10, closing above that level on Wednesday. In doing so, it scored an upside breakout from a visible, albeit unorthodox, inverted head-and-shoulders bottoming pattern. That target is the $49 area, which would put it above the 200-day moving average for the first time since July and offer a nice gain over the next few weeks.

Add in a fat 5.7% dividend yield, and even if the stock continues to lag, it remains a conservative way to participate in the energy rebound. 

Recommended Trade Setup:

— Buy BP at the market price
— Set stop-loss at $39.50
— Set initial price target at $49 for a potential 16% gain in eight weeks 

Note: If you’d like to mitigate your risk in this volatile sector further, you have two options:

Option #1 is to put up less money upfront for the chance at bigger returns using a strategy that made our newest adviser $600,000 by the time he was 18. 

Option #2 is to hold the shares in a high-income brokerage account where some traders are earning an additional $1,200 or more in income each month. 

For traders with a bit more nerve and a feisty contrarian spirit, shale oil exploration and production stock Oasis Petroleum (NYSE: OAS) offers a different set of virtues. 

The first is the very bearish sentiment surrounding shale oil stocks. If prevailing wisdom was negative on more traditional energy stocks, it was downright hateful for this subgroup. When the bottom fell out of oil prices last year some shale stocks tumbled more than 80%. OAS was one of them.

As loved as shale stocks were when oil prices were rising, they were completely forsaken by the end of 2014. Nobody wanted to touch them, and headlines from drilling operator employment to real estate demand in states hosting this industry kept fear levels high. That is a recipe for a stock that could have big potential gains once it starts to move higher — and OAS has started to move higher.

Many shale stocks actually stopped falling in December and have been trading in healing sideways patterns since then. This allows bulls and bears to rethink their strategies. 

It may not seem this way since OAS remains in a trading range, but something important has changed for the better. Volume is soaring and most of it is changing hands as prices moved higher, not lower. This pushed the cumulative volume study to levels not seen since July — before crude oil prices broke down.

That tells us that demand is strong here and suggests the trading range is close to an upside breakout. Indeed, Oasis has spent the past week trading above its key 50-day average, something it has not been able to sustain since the middle of last year — again, before oil prices sank.

Based on the size of the trading range, the upside objective could be as high as $27.50, which is where the falling 200-day average will be in just a few weeks. And that would still only be a 38.2% retracement of the entire bear market trend from last year. Parameters for this trade reflect greater volatility and the very wide stop provides greater risk in the hope of capturing a very big reward.

Recommended Trade Setup:

— Buy OAS at the market price
— Set stop-loss at $16.25
— Set initial price target at $27.50 for a potential 47% gain in eight weeks

This article was originally published on ProfitableTrading.com: 2 Ways to Avoid Missing Out on the Energy Rebound