A rotten month for energy investors got a little less so over the last week, but not enough to leave anyone convinced that it’s all sunshine and rainbows from here.

In fact, the market action over the past week provided plenty of hints that the thrill-seekers who bought the low tick of Oct. 15 might yet get another opportunity to play contrarian.

Start with WTI crude futures, which after bouncing by as much as $3 from last week’s lows are back testing the $80 level and seem almost destined to put up a mid-70s print just to make sure all the speculative excess has been well and truly wrung out.

Crude’s failure to mount much of a rally to this point seems perplexing if not downright ominous given the enthusiastic bargain-hunting by Chinese buyers, a dip in the US crude rig count, and a cut in Saudi Arabia’s September output at odds with recent Saudi threats of a price war.

Oil prices have stayed weak despite a big drop in speculative long futures positioning over the last month. The slippage back to the lows late this week contrasted with the strong recovery in the stock market.

Energy stocks have lagged the broader market for the last week, the Energy Select Sector SPDR ETF (NYSE: XLE) recouping 2.2% over that span, versus 3.6% for the S&P 500. Meanwhile, the S&P Oil & Gas Explorations & Production ETF (NYSE: XOP), lost 2.9% over the same timeframe. It’s a proxy for the small-cap and midcap shale drillers that remain on clearance sale thanks as investors fret the effect of lower oil prices on balance sheets stretched by years of spending far beyond operational cash flow. 

On the bright side, the Alerian MLP Index representing the bulk of the domestic energy midstream sector has held up much better despite the panic selling of MLPs along with everything else during the first half of October.  The Alerian has produced a total return of nearly 15% year-to-date, and is less than 6% from the record high set eight weeks ago.

Our recent research for our sister publication MLP Profits confirms that the distributions of master limited partnerships remain safe, because they’re mostly backed by fixed or well-hedged long-term contracts.

In fact, some MLPs and companies are poised to reap a major windfall from the current weakness in fuel prices. That’s because, as noted this week in The Wall Street Journal, falling gas prices tend to inflate the profits of fuel retailers, which tend to take their sweet time in passing on their wholesale discounts to their customers.

Industry data cited by the Journal suggests retail fuel margins are up as much as 40% week-over-week and more than 50% from a year ago. Of course, those margin gains are likely to erode once gas prices stop going down for any length of time. But cheaper gas will still be supportive of demand, and even more so of the snack and drink sales that have become a source of industry growth.

As it happens, conservative portfolio recommendation Energy Transfer Partners (NYSE: ETP) is heavily exposed to this favorable trend via its ownership of the old Sunoco filling stations chain as well as the general partner and limited partnership interests in another major fuel retailer, Susser Petroleum Partners (NYSE: SUSP).

Today, as part of a broader call restoring Buy ratings to a number of portfolio recommendations, we’re upgrading ETP to a Buy below $70. The top-ranked Best Buy at MLP Profits is joining The Energy Strategist’s list of top picks as well, slotting in at #2 right behind National Oilwell Varco (NYSE: NOV).

To add exposure in fuel retailing, we’re adding Valero (NYSE: VLO) spinoff CST Brands (NYSE: CST) to the Growth Portfolio with a buy limit of $42. While the stock has rallied lately to get back into positive territory for 2014, it remains undervalued given the margin trend and the gains made by other fuel retailers. As Energy Transfer’s springtime buyout of Susser Holdings showed, filling station networks remain attractive targets for MLPs thanks to relatively low valuations, stable cash flows and defensive characteristics.

More broadly, we’re setting new Buy limits above the current price for our entire Best Buys list. The 10 stocks on this list from the Growth and Conservative portfolios have weathered the correction to this point much better than the energy sector as a whole. Their long-term strengths clearly outweigh the very real risk of further near-term losses at this point.

Investors looking to add energy exposure to this sector can start with the strongest franchises and safest long-term bets like National Oilwell Varco, Energy Transfer Partners and Schlumberger. Those venturing into the exploration and production section of the list might want to reserve half of the intended investment for later, in case the sector suffers another precipitous decline.

The new Best Buys list, with maximum buy thresholds, runs as follows:

1. National Oilwell Varco (NYSE: NOV) – $82

2. Energy Transfer Partners (NYSE: ETP) – $70

3. Schlumberger (NYSE: SLB) – $107

4. EOG (NYSE: EOG) – $100

5. ConocoPhillips (NYSE: COP) – $78

6. Energy Transfer Equity (NYSE: ETE) – $66

7. Enterprise Products Partners (NYSE: EPD) – $42.50

8. Devon Energy (NYSE: DVN) – $70

9. EQT (NYSE: EQT) – $99

10. Jones Energy (NYSE: JONE) – $16

11. Carrizo Oil & Gas (NASDAQ: CRZO) – $59

12. Oasis Petroleum (NYSE: OAS) – $38

13. Cabot Oil & Gas (NYSE: COG) – $35

14. SunEdison (NASDAQ: SUNE) – $21

15. First Solar (NASDAQ: FSLR) – $65

Why are we encouraging buying here even though further volatility likely lurks ahead? Because we want you to be ready to act if and when it comes. But also because it’s become increasingly clear over the last month that recent declines and the bearish sentiment they have spawned are at odds with long-term energy fundamentals, which in all likelihood require crude above $80 a barrel and natural gas above $4 per thousand cubic feet to satisfy the likely long-term growth in demand.

That’s not apparent at the moment, of course, which is why so many energy equities have been deeply discounted. In addition to those on our Best Buys list, we’re also upgrading a midstream recommendation we recommended taking profits on in June at a higher price, an MLP that retails propane and figures to enjoy improved margins just like the gasoline merchants and, finally,  several small and midcap drillers with share prices down in the dumps amid a dearth of buyers. The capital losses among the latter have been out of all proportion to the likely effect of lower crude prices on these companies’ long-term success odds. Again, consider adding to these positions gradually over time. These other reinstated Buy recommendations, along with their new buy limits, are as follows:

Targa Resources (NYSE: TRGP) – $140

AmeriGas Partners (NYSE: APU) – $51

Chesapeake Energy (NYSE: CHK) – $26

Whiting Petroleum (NYSE: WLL) – $70

Penn Virginia (NYSE: PVA) – $9.50

Emerald Oil (NYSE: EOX) – $4.50

Gastar Oil & Gas (NYSE: GST) – $4.75

Rex Energy (NASDAQ: REXX) – $11

These companies continue to build long-term value even as fund managers sell their shares to meet redemptions. Targa, for example, recently announced an acquisition that will provide an improved tax shield for its modest but now even faster growing dividend. Chesapeake continues to surpass expectations with the cash it has raised from non-core asset disposals. Whiting will have increased scale for operating efficiencies on its productive Bakken acreage following an advantageous all-equity merger with Kodiak Oil & Gas.  Rex has already preannounced a strong quarter. And so on. Many of the oil and gas producers on this list are extensively hedged for the balance of 2104 and the early part of 2015. And many retain huge upside not just from a potential rebound in energy prices but from continued development of shale reserves that they’re not getting much credit for right now.

One potential catalyst ahead is the likely pickup in merger and acquisitions as the larger and better capitalized producers target the heavily discounted smaller fry to boost growth.

But even if such deals don’t pan out, and even if energy prices drop even lower, all of these companies have sufficient liquidity and sufficiently attractive assets to weather the slump. And there may be  few opportunities to buy them this cheap, with sentiment this bearish.

That’s especially true of Emerald Oil, now selling at more than 60% off its price on Labor Day, while paying minimal interest costs and pursuing wells that remain very attractive at current prices. We take a deeper look at its finances and potential downside in a separate article. But suffice it to say its future remains bright, while the risk from even lower crude prices appears fully baked  into the share price at this point.