Trump recently announced a 50% tariff on the EU starting June 1. Only to walk it back after he received a "very nice call" from European Union President Ursula von der Leyen, which quickly repaired the Nasdaq's 1.5% drop. He also dropped his 145% tariff on China to 30% last month, which again sent stocks surging. This has been the pattern with Trump so far. Despite his threats, he's never followed through on his most bombastic tariffs. He prefers to announce them and then pause them. It's leading to what traders are calling the TACO effect. It stands for... "Trump Always Chickens Out." See the chart below. As you'll notice above, there have been three "TACO" moments where Trump paused tariffs over the last few months. Each time the pause is announced, the markets go back up. You'll also notice the pauses haven't had as abrupt an effect recently as they have had back in March. Once Trump makes the announcement for tariffs, I've been looking to overreactions. So far, this has been a winning proposition. A few weeks ago I closed 3 trades for winners for a 100% win-rate, including a 16% winner on DECK in 1 trading day. I understand these short-term fluctuations can be stressful as a trader, but the truth is... you can work overreactions in your favor if you know where to look. I do this in The War Room every day. |
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