The Royals have lost just one of their last six Premier League games and, on Wednesday, netted a brace of late goals to secure a 2-2 draw against Chelsea.
That point moved them out of the relegation zone and the Black Cats travel to the Madejski Stadium this weekend to face Reading for whom Adam Le Fondre was on target twice against the Blues in midweek.
And O'Neill said: "That was a big, big result for them and they've had some amazing ones recently, pulling games out of the fire when they looked beaten.
"Wednesday is a case in point. Reading never give up and it will be a difficult task for us.
"Their win over West Bromwich Albion (in mid-January) was remarkable, coming back from two goals down to win the game late on.
"That gave them great confidence to keep going and they will feel as if they can get out of trouble.
"In the bottom half of the table every one of us is chasing those elusive results. I'm hoping we can put a proper performance together.
"Hopefully we can return to the form we showed against Wigan, which wasn't so long ago."
Meanwhile, O'Neill is confident new signing Danny Graham will be a hit on Wearside despite the misgivings of some fans.
O'Neill said of the boyhood Newcastle fan:"In the scheme of things, it's how Danny does for the football club that will determine everything else.
"I have got really no doubts that he will score goals and he will prove a great buy."
Graham's signing from Swansea follows in the footsteps of midfielder Alfred N'Diaye and defender Kader Mangane, who will spend the rest of the season on loan from Saudi Arabian side Al Hilal.
O'Neill was happy with the business he did and is expecting to see a return on his investment.
He said: "I am pleased. I think Alfred N'Diaye will eventually - when he learns the game in the sense of the things we expect of him to do that might be a little bit different to his previous club - will be excellent for us.
"I think Danny will do well and score a few goals as well, which will help and big Mangane, if he gets an opportunity, I am sure between now and the end of the season will prove some value as well."