Thanks to evidence of progress regarding the Trump administration’s trade policies, forward-looking investors may want to consider Brazilian commodities giant Vale (VALE). At first glance, VALE stock appears to be a risky proposition, having incurred a nearly 23% loss over the past 52 weeks. Because of the uncertainties surrounding Trump’s tariffs and their downwind impact, the commodities sector has slumped. Still, a sentiment rebound might be in the works.

Notably, the Associated Press reported that Americans’ view of the economy improved in May following five straight months of declines. Throughout this year, anxiety over President Trump’s wide-ranging tariffs dropped consumer confidence to its lowest level since the onset of the COVID-19 crisis. However, subsequent levy pullbacks, pauses and negotiations have sparked some sense of optimism that normalcy may eventually return.

It's not just consumer confidence that’s improving. The proportion of surveyed consumers who believe that the U.S. is headed toward a recession in the next 12 months declined from April. It should also be noted that the benchmark S&P 500 is finally in positive territory for the year, albeit only marginally.

For investors of VALE stock, they have every reason to hope that the present trajectory holds true, particularly as it relates to thawing relations between the U.S. and China. In April, when the White House revealed its Liberation Day tariffs, President Trump had his crosshairs on China.

The problem with that approach from Vale’s perspective is that China represents the company’s biggest customer. Essentially, VALE stock is a proxy of the health of the Chinese economy. Given that so much of global GDP is dependent on the top two economies of the world doing business with each other, a productive partnership is crucial.

Based on current political trends, VALE stock may be heading toward an optimistic outlook.

Market Breadth Points to a Potential Opportunity in VALE Stock

While the investment narrative for Vale is much more enticing than it was last month, traders — particularly options traders — require more actionable data. With investing, the focus centers on the “why” of a particular opportunity. With trading, the focus is on the “how” — as in how much, how fast, and most importantly, how likely.

In other words, when dealing with options, market participants must prioritize probabilities. In this context, every trade starts with a baseline analysis that can functionally be calculated via a rise-over-run-style equation.

For example, on any given week, the chance that a long position in VALE stock will be profitable is only 47.9%. This figure is calculated by taking the number of positive weeks divided by the total number of weeks in the dataset. Using data from January 2019, VALE suffers from a negative bias.

Nevertheless, it would be inaccurate to assume that this negative bias applies to all sentiment regimes. Under certain cycles of accumulation (positive sessions) and distribution (negative session), VALE stock may feature probabilities that differ significantly from the baseline, thus facilitating favorable speculative transactions.

In the past two months, VALE stock has been riding a 3-7-D market breadth sequence: three up weeks, seven down weeks, with a net negative trajectory across the 10-week period. Notably, in 60.47% of cases, the following week’s price action results in upside, with a median return of 2.79%.

Should the implications of the 3-7-D sequence pan out as projected, VALE stock could see a price tag of $9.63 in short order. So long as the bulls maintain control of the market, it’s quite possible that over the next several weeks, they will make a push toward $10.

Leveraging Market Intel to Craft an Aggressive Wager

Those interested in pursuing the numbers game may consider the 9/10 bull call spread expiring June 20. This transaction involves buying the $9 call and simultaneously selling the $10 call, for a net debit paid of $48. Should VALE stock rise through the short strike price at expiration, the maximum reward is $52, a payout of over 108%.

Primarily, this trade is attractive because the 3-7-D sequence is historically a reversal signal. With this indicator, VALE stock transitions from having a negative bias to one with a 60/40 positive bias. Colloquially, the deck is hot, thus incentivizing a bullish wager.

To be clear, the aforementioned sequence doesn’t guarantee a positive outcome. After all, a 60% success ratio still leaves a failure rate of 40%, which isn’t anything to scoff at. But with proper money management, traders can come out ahead with a system that is consistently accurate 60% of the time.