Occidental Petroleum and Diamondback Energy may be poised to rally after U.S. crude oil prices broke above a key resistance level on Friday, according to Miller Tabak, chief market strategist. US crude oil settled at $78.01 a barrel on Friday to close its best week since September 1 thanks to strong US growth – as evidenced by a faster-than-expected fourth-quarter GDP print – and China promising more spending to stimulate its economy. West Texas Intermediate futures breaking above the 200-day moving average of $77.64 should confirm that crude oil prices have made a significant shift to the upside, Miller Tabak’s Matt Maley told CNBC. “This paves the way for higher prices,” said Bob Yawger, managing director and energy futures strategist at Mizuho Americas. Yawger said WTI is not only above its 200-day moving average, but a break above that level is “certainly much more bullish” for crude futures prices. Key test next week The energy sector has lagged oil prices for the past four to six weeks, and confirmation now that crude is moving higher will help stocks “catch up,” Maley said. A key test will be whether WTI next week stays above the 200-day moving average that served as resistance on the price chart, the strategist said. Conversely, however, Maley noted that it is also critical to watch the 200-week moving average of $71.58 a barrel for US crude as a price support level. “If crude oil goes down, breaks below that level — that’s going to tell you I’m wrong. It’s not working,” said strategist Miller Tabak. Occidental and Diamondback, in particular, may be poised to bounce because they are highly leveraged to the price of oil, Maley said. Occidental is down 2.2% this year while Diamondback is up less than 1%. The U.S. oil ETF, a decent proxy for crude, is almost 10% higher in 2024. Occidental could return to 2022 highs between $75 and $80, Maley said. That would mean upside of as much as 37% from Occidental’s Friday close of $58.40. Buffett favorite Mali also noted that Occidental is Warren Buffett’s favorite. Berkshire Hathaway increased its stake in the Houston-based company to 34 percent by the end of 2023 from about 21 percent at the end of 2022. “He’s not a big leverage guy,” Maley said of Buffett. “And that tells me that if he’s buying a stock that’s highly leveraged to the price of oil, he thinks oil prices are going up.” Diamondback could reach $170, Maley said, suggesting a 9% appreciation from Friday’s close of $156.24. About 58% of Wall Street analysts are bullish on Occidental, while 38% rate the stock a buy-equivalent, with a consensus price target of $67, according to FactSet. Wall Street is more bullish on Diamondback, with 82% of analysts giving the stock the equivalent of a buy and an average price target of $178. No displacement Although Yawger believes energy stocks will rise on higher crude prices as traders look for failed stocks, the sector won’t lead the rest of the market: “They’re not going to displace technology for the front of the pack” , he said. That said, Yawger believes the outlook for crude prices is favorable, due to a combination of falling U.S. inventories and production, the U.S. economic expansion, fiscal stimulus in China, and equity markets all hitting recent highs of the seasons — if the market is the leading indicator . Not to mention the growing geopolitical risk from the conflict in the Middle East and the ongoing Russia-Ukraine war. Just on Friday, Houthi fighters claimed responsibility for a missile attack on an oil tanker, while a Ukrainian drone attack on a Russian fuel terminal in the Baltic Sea helped push oil prices higher earlier in the week. “The only wild card out there is Ukrainian attacks on Russian infrastructure, as well as oil infrastructure,” Yawger said. “They stepped it up – that could also put a bid on the market.”