DELAFIELD, Wis. (Stockpickr) -- Energy has some energy in this shaky equity market.

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In contrast to all the recent problems with the technology and biotech stocks, there's one sector that's been doing relatively well during the overall market decline: the oil and gas complex. The United States Oil Fund ETF (USO - Get Report) has risen by 11% over the last three months and is currently trading just a few points off its 52-week high of $39.54 a share.

The major driver for the oil sector at the present moment is the geopolitical tensions in the Ukraine, which show no signs of letting up. In fact, they look like they could turn much worse in the blink of an eye. The latest development out of the Ukraine is that pro-Russian militants are starting to take control of the eastern town of Slaviansk as Ukrainian military forces gather nearby. The fear among many is that a full-blown civil war breaks out in the Eastern part of the Ukraine, and that's a scenario that could embolden Russian President Vladimir Putin to make a push for more territory or all of Ukraine.

There's just no telling how aggressive Putin might get if pro-Russian separatists start to engage with the Ukrainian military in a live conflict. This could spiral out of control very quickly, and the impact on the energy market could be huge. Russia controls a vast amount of natural gas pipelines that run through the Ukraine and serve most of Europe. Any major disruptions in the natural gas flow to Europe would be a major blow for the economic viability of that region. The oil risk due to this potential conflict is big as well, because if things escalate, the U.S. will likely start slapping Russia with economic sanctions.

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Make no mistake about it, Russia will not sit by and do nothing if the U.S. starts to implement sanctions. It will use the best weapon it has against the West -- and that's its oil exporting business. Russia will ramp up oil shipments to China and cut off Europe and the U.S., leaving them both far more dependent on high-priced oil from the Middle East. To put things into perspective on how big of a player Russia is in the energy market, consider the fact that Europe is estimated to get 40% of its natural gas from Russia and over 30% of its crude oil.

With all of this mind, I believe it's a great time start looking at small-cap oil and gas stocks, which could be the sweet spot as geopolitical tensions rise across the pond. These small-cap energy stocks could also be a great way to protect your portfolio against a market correction, since they could see enhanced interest as defensive plays. Fundamentally, they will make sense as well, since a heightened conflict in the Ukraine will continue to drive energy prices higher, which could flow to their bottom line.

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One unconventional oil and gas producer that could be an excellent long idea here is Triangle Petroleum (TPLM), which engages in the acquisition, exploration, development and production of unconventional shale oil and natural gas resources in the Bakken Shale and Three Forks formations in the Williston Basin of North Dakota and Montana. This energy player is off to a decent start in 2014, with shares up around 8%.

Triangle Petroleum recently announced that it expects to recognize a gain on its investment in Caliber Midstream Partners for fiscal year 2014, and that news has forced it to reschedule its earnings report and conference call for Thursday of this week before the market open.

If you take a glance at the chart for TPLM, you'll notice that this energy stock recently formed a double bottom chart pattern at $7.63 to $7.75 a share. Following that bottom, shares of TPLM have started to uptrend and move back above both its 50-day and 200-day moving averages, which is bullish technical price action. The recent strength in shares of TPLM is starting to push this stock within range of triggering a big breakout trade.

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Traders should now look for long-biased trades in TPLM as long as its trending above its 50-day at $8.29 or above those double bottom support zones at $7.75 to $7.63 and then once it breaks out above some near-term overhead resistance levels at $9.29 to $9.40 a share with high volume. Look for a sustained move or close above those levels with volume that registers near or above its three-month average action of 1.33 million shares. If that breakout materializes soon, then TPLM will set up to re-test or possibly take out its next major overhead resistance levels at $10.50 to its 52-week high at $11.66 a share. Any high-volume move above $11.66 will give TPLM a chance to trend north of $12 a share.

One major reason, besides the Ukrainian conflict, that I am warming up to TPLM here is the large short interest in the name. The current short interest as a percentage of the float for TPLM is pretty high at 13.8%. That means that out of the 75.69 million shares in the tradable float, 10.35 million shares are sold short by the bears. The bears have also been increasing their bets from the last reporting period by 22.8%, or by around 1.92 million shares. The shorts might be pressing their bets at are horrible time, considering the strength in the energy markets. This could be setting up a big opportunity for a large short-squeeze for TPLM in the near future.

Traders or investors are probably best-served to wait until after TPLM reports its earnings on Thursday before jumping into the stock. Earnings are always a gamble and hard to predict, but I would suggest bulls on this stock be ready to jump in once the quarter is out of the way, as long as it's not a disaster. This breakout play for TPLM looks ready to trigger soon, so watch for strength after the earnings report is out of the way.

-- Written by Roberto Pedone in Delafield, Wis.





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At the time of publication, author had no positions in stocks mentioned. Roberto Pedone, based out of Delafield, Wis., is an independent trader who focuses on technical analysis for small- and large-cap stocks, options, futures, commodities and currencies. Roberto studied international business at the Milwaukee School of Engineering, and he spent a year overseas studying business in Lubeck, Germany. His work has appeared on financial outlets including and You can follow Pedone on Twitter at or @zerosum24.