Monday was a huge day for the entire energy sector. With the help of a solid gain in crude oil, many of the top gainers in the S&P 500 came from energy. Finishing the day in the No. 3 spot was Murphy Oil (MUR) - Get Report ,with a 9% gain, making it one the eight energy stocks in the S&P 500 top 10 list. 

With a very solid foundation underneath, Murphy Oil is set up well for a fresh bull run. Investors should take on a much more positive stance on the name in the near term.

From early March until the end of April, Murphy Oil traced out a powerful rally. The stock gained over 150% during this eight-week run. As May began, the stock was in pullback mode, and since the middle of that month shares have been stuck in a relatively tight range.

Murphy Oil has virtually gone nowhere from mid-May until this week, while the 200-day moving average kept the downside in check.

This healthy sideways action, which was quite boring for Murphy Oil bulls, now appears ready to give way to a fresh rally leg. A return to the 2016 highs would not be a surprise, considering the very stable base that has been building since August.

In the near term, Murphy Oil investors should consider the stock a buy on weakness.  Initial support is in place from the $30.00 to $28.30. This key zone includes last week's high as well as Tuesday morning's breakout gap. 

On the upside, Murphy Oil has plenty of room to run once the $33.50 area is convincingly taken out. With a fairly high short interest ratio of 7.4, the bears will certainly be feeling the heat as the rally passes this area. The added fuel should provide the boost needed to drive the stock back up to the April peak.

On the downside, a close back below $26 would take out last week's low, sending a clear warning sign that the six-month consolidation has not completely run its course. 

Click here to see the below chart in a new window.

Image placeholder title

This article is commentary by an independent contributor. At the time of publication, the author held no position in the stocks mentioned.