Why would you say this? It just moved up through an old all-time high on decent volume on a wide spread and closed near the high? I would say there would be more risk if volume did not increase (however still would have been nice to see volume higher than today).
Also, RSI is sitting around where it was in April at the $45 level, so it would have been reassuring to see RSI move higher.
I did not take the trade, just did not have confidence in this breakout and will be looking for a consolidation.
Cannot say there is less risk in taking a short.........
Everyone has a different style of trade, but just to explain my thoughts here goes
1) I always put myself in the situation of what the big guy would do and what the amateur would do.... the amateur would buy at these levels and the big guys would sell at these levels... remember, the big guys pick up at the bottom from $33 and sells off at the top to the average joe who thinks it will go higher and higher and higher
2) Looking at BHP, I see where it has come and where it is now... from $33 (mid march) to $48 in the space of 2 months is way too fast, way too soon... so this give me an opinion that this stock is WAY too over extended...
3) I look at the volume around October 07 to Jan 08 and it looks quite decent on the sell.... compared with the volume from march 08 till now, it has been very light and is getting lighter (trend wise).... yes, we may have a few up spikes in volume, but the overall trend is very light.... so this tells me that the buyers are not 100% behind the stock but rather taking partial position. Not a strong case for the bulls at a level of $48....
4) Volume did pick up today... but looking at intaday charts, it all happened around the $48 mark after the move up... that tells me that the big guys are selling into the power move up and hence we have volume... but considering the stock did $3 today, volume is shocking!
5) RSI, MACD and all those other indicators... I take those with a grain of salt as they are all lagging.... I might use them as a second opinion, but that's about it.... i.e. if a stock is overbought I might reconsider taking a long position and wait till it settles down.
So all these points I have made formulate a negative bias based on the way I trade.... I definately would not short at this stage, but the moment i see one sell day with heavy volume I will jump in.... On a risk to reward ratio, the downside looks more attactive.... any move higher than $48 is resistance and the next decent level of support is $40 - $42... another point, BHP is in a channel and it just hit the top resistance, so a pullback to around $46 - $47 would be expected before another leg up... I think $50 - $51 will be tough to break, but I will only trade it down if I see heavy volume at this level....