Hey friend,
Today’s housing data came in weaker than expected.
The NAHB homebuilder confidence index fell to 29 in October, below the 31 forecast and down from 32 in September.
Builders are cutting prices to bring buyers back: 43% reported price reductions this month, with the average cut at 6%.
Let’s see how the markets have been moving.
The Daily Direction
Note: Indexes closed lower to end last week but opened higher this morning – with the exception of the Dow, which saw its medium-term direction dip into negative territory.
The Daily Nugget
You don’t need to find a stock before everyone else.
A lot of traders believe the big money comes from discovering a stock before everyone else.
Get in before the crowd catches on, and you’ll have the most to gain.
It sounds sensible. But it can also make you dismiss a good opportunity simply because other buyers got there first.
You come across a stock that has climbed 20% over the past few months.
Your first thought: “Too late. I missed it.”
So you move on, looking for something that hasn’t gone anywhere yet.
But a stock sitting still isn’t necessarily an undiscovered opportunity. It might be waiting for buyers who never arrive.
And a stock that has already risen isn’t necessarily finished.
Suppose a company spends a year trading between $40 and $50.
At $43, it looks cheaper. But it has also tried and failed several times to get above $50.
Then it finally breaks through on heavy trading volume. After a pullback, buyers step in around $50 and push it higher again.
Someone buying at $52 is paying more than the person who bought at $43.
But they also have information the earlier buyer didn’t: the stock has cleared a level that repeatedly stopped it, and buyers have returned to defend that area.
That doesn’t guarantee another advance.
But it does give them a specific setup to evaluate, including where that setup would fail.
Of course, if the stock has already raced far above that level, the risk may no longer make sense.
The point is to assess the entry available now, rather than reject it simply because someone else paid less.
Ask yourself: Is there enough potential upside from here to justify the loss I’d take if the trade fails?
That question is much more useful than wishing you’d found the stock three months ago.
Finding a winner early feels good. But you don’t get paid for being first.
You get paid for the part of the move you actually capture.
The Traders Agency Team
