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Shares of ZaZa Energy (NASDAQ:ZAZA) surged higher on Monday following news that ZaZa would end its partnership with Hess Corporation (NYSE:HES).

Click to enlarge

ZAZA Chart

ZAZA data by YCharts

The terms

  • Hess and ZaZa will end their agreements in both the Eagle Ford shale and France's Paris Basin.
  • Hess and ZaZa will swap certain oil, gas, and mineral interests.
  • ZaZa 's holdings in the oil-rich Eagle Ford share will increase six-fold to 72,000 acres.
  • Hess has already paid ZaZa $15 million and will pay ZaZa another $70 million once the deal closes.

Volume

As I write this, midway through the trading session, ZaZa has already traded 1.7 million shares. The average 10-day trading volume for ZaZa is just 280,000 shares. Monday's volume may signal short-term capitulation to the upside, as it is many times the average volume.

Resistance

As seen in the chart below, ZaZa is now trading close to resistance levels hit earlier this year. While the stock may ultimately move through this resistance, the stock should consolidate for some time first.

ZAZA Chart

ZAZA data by YCharts

Oil Decline

The recent decline in oil prices is an important headwind when considering ZaZa . If oil prices continue to fall, investors will continue to sell oil stocks, including ZaZa .

USO Chart

USO data by YCharts

My Take

I would use Monday's move in ZaZa to take profits. The massive volume and sharp price move leads me to believe that some type of short-term buying climax has been reached. While the long-term story has improved significantly, I believe investors will have a chance to buy ZAZA on a pullback in the coming days.

Source: ZaZa's Shares Move Higher: What You Need To Know Now