Baytex Energy Corp. (TSX:BTE)(NYSE:BTE) rose from $4 per share on October 2 to more than $5.60 per share on October 6, clocking in a staggering 40% gain in just three trading sessions.

The market certainly didn’t expect the dramatic turnaround, and investors are wondering if the rally will continue.

Employment numbers and oil rumours

The stock started to rise at the end of last week as money began a broad-based move back into commodity names.

The shift in sentiment came after a disappointing employment report in the U.S. threw cold water on the idea that interest rates are imminently headed higher. This put pressure on the American dollar, which sparked a move into commodities, including oil.

The oil rally continued through Monday and really got a shot in the arm on Tuesday when rumours hit the market that OPEC and Russia might be in talks to stabilize oil prices. A forecast for strong demand and tighter supplies in 2016 also helped encourage the bulls.

Takeover season

Rising crude prices certainly helped, but the biggest boost might have been caused by a bout of takeover fever triggered by Suncor Energy’s unsolicited bid for Canadian Oil Sands. The all-stock deal works out to be a 43% premium over the pre-bid closing price and about 35% higher than the stock’s 30-day average.

Baytex isn’t an oil sands player, but it is a very beaten-up energy name with attractive assets. Investors might have decided to get ahead of the curve just in case the Suncor bid is the starting gun for a massive wave of consolidation in the Canadian oil patch.

More gains ahead?

Energy players thought the rout had ended this spring when WTI oil rallied back above $60 per barrel. As we all know, things reversed course in a big way through the third quarter, and the latest pop might be a short-term speed bump on a downhill ride that has further to go.

Should you buy?

Baytex owns an attractive portfolio of properties, including the Eagle Ford assets it acquired in June of last year. A buyout could be in the cards, although investors probably shouldn’t buy the stock on that hope.

If you think oil prices have bottomed, Baytex is a reasonable contrarian bet, but the market still looks volatile and a quick reversal is certainly possible. I would stay on the sidelines for the time being.

Tired of watching your dividends disapper?

These three top stocks have delivered reliable dividends to shareholders for decades. Check out our Special FREE Report: "3 Dividend Stocks to Buy and Hold Forever".

Simply click here now now to get the full analysis, for free!

NEW! This Stock Could Be Like Buying Amazon In 1997

For only the 5th time in over 14 years, Motley Fool co-founder David Gardner just issued a Buy Recommendation on this recent Canadian IPO.

Stock Advisor Canada’s Chief Investment Adviser, Iain Butler, also recommended this company back in March – and it’s already up a whopping 57%!

Enter your email address below to claim your copy of this brand new report, “Breakthrough IPO Receives Rare Endorsement.”

Fool contributor Andrew Walker has no position in any stocks mentioned.