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Did someone say $54 oil?

Indeed, with oil trading in the mid-$50s and no real signs of a good reason for a big pullback, there is a lot of talk about a real leg up in the energy equity markets. After all, it's been one of only a handful of sectors that have been working in recent months, if not longer; earnings have looked solid and analysts seem to be coming around to understanding the nuances that make this energy cycle unique. (I refuse to use the phrase "it's different this time" because the end game is likely not terribly different at all.)

That said, it is always a good exercise to think through the other side of the trade to see where you could go wrong putting all your eggs in an electrified sector. With that in mind, here's a list of the reasons to be an energy bear:

Oil has topped at $54 a barrel. There is no way that we can sustain $50-plus oil without significant economic pain that will ultimately lead to a sharp drop in energy demand and, with it, energy prices. It's not a question of if, but when.

Everybody is piling into the sector. The energy craze of 2004-05 is like the tech crazy of the late-1990s. "Big Mo" baby can be heard across the lobbies of swank watering holes as the momentum players jump into the energy space.

Sell-side pundits are beginning to see the light (this one hurts!). There are very few skeptical analysts left. Even Jim Wicklund at Banc of America -- who I believe is one of the most thoughtful energy analysts on the Street -- tossed in the towel as a skeptic saying he was "wrong" to be cautious on the duration of the cycle last summer.

Too many stocks are at 52-week highs and are already discounting $50 crude and $6 natural gas. What kind of upside surprise can possibly be found with this price action?

It has become too easy to make money in this sector. That is always a sign of a sector top. (This is my favorite.)

Wow, I look at that list and wonder if energy investors better pack it in today. The odds for more growth are about as long as Coastal Carolina making it to the Final Four. The good times are ending ... turn out the lights, the party's over.

Not so fast. As I wrote earlier this week,

don't give up on energy. Here are some answers to those points.

How many times have you heard the top in oil called in the last year? After about every $2.50 rise: $35, $37.50, $40, $42.50 ... you get the picture. Oil prices seem high to me too but the market tells the story. And, remember, there is plenty of money to be made at $45 oil, forget about the $54 price.

I don't see the momentum charge yet. I still talk to plenty of skeptics that missed this run and are content to wait until the "correction." Correction, of course, is a matter of degree. The insane momentum money doesn't seem to be anywhere near interested in this group yet.

The sell-side has become more bullish in recent days -- including calls Friday by Lehman and Merrill -- but widely followed analysts like Wicklund still have room to bump their bullishness to another level. Until all the holds and underperforms are gone, there are still positive moves that can push the sector higher.

While stocks are closing in on new highs, the discounting of fat oil and natural gas profits is simply not true. I was with a company just this week -- and this is the norm -- that continues to run profit forecasts on $35-ish oil and $5.00 natural gas. There is plenty of upside in estimates if commodity prices are higher than that.

While the move in energy stocks has broadened, there are still winners and losers. There are still values in the marketplace, relative to the group. And, there are companies that are leaders -- like Nabors , BJ Services or even Halliburton -- that should see solid profits, even above current expectations.

While the seasonal nature of energy suggests commodity prices could consolidate as we move into spring, that is likely to create an opportunity for investors, not signal the end of a cycle.

Earlier this week I was with one of the most savvy energy investors I know who, nonetheless, bemoans the fact he was way too cash-heavy in the second half of last year. "Those with too much experience in energy missed the signals of this move," he said.

His conclusion: While the core tenets of cycles never change, their duration and the rules during the cycle are ever-changing. And, this energy cycle is clearly a demonstration of just how powerful those changes can be.

"To make money in this cycle, you have to think outside the box," he said, meaning you have to look beyond the noise and see the (still) compelling fundamental outlook.

Christopher S. Edmonds is vice president and director of research at Pritchard Capital Partners, a New Orleans energy investment firm. He is based in Atlanta. At time of publication, neither Edmonds nor his firm held positions in any securities mentioned in this column, although holdings can change at any time. Under no circumstances does the information in this column represent a recommendation to buy or sell stocks. While Edmonds cannot provide investment advice or recommendations, he welcomes your feedback and invites you to send it to