VHI (Valhi Inc.) will be added as both an Active Long Trade and a Long Trade Setup. As VHI is a thinly traded stock with virtually no trading activity in the after-hours trading session, the entry on VHI will be dependent on where the stock trades following the opening bell tomorrow morning. The most objective entry levels for aggressive traders trying to catch this falling knife while still solidly entrenched in a downtrend would be anywhere above the 6.35- 6.40ish area as an overshoot of the 6.50ish support level is certainly a possibility based on the current rate of descent in the stock. The next objective entry & that with a somewhat lower probability of being stopped out would be to wait for a breakout above the bullish falling wedge pattern shown on the 120-minute chart below. This is a high risk, potentially high return trade and as such, should be considered a very aggressive trade regardless of which entry criteria is used. VHI is also a thinly traded stock as well & therefore, one might consider the use of limit orders vs. market orders as the spread on this stock can be high at times.

Two previous trades on VHI have been posted on Right Side of the Chart. The first short trade in early 2012 hit the 3rd & final target for a 41.3% gain in less than 3 months and reversed sharply upon reaching the final target level. The second & last trade on VHI, also a short trade, was initiated in early 2013 and hit the second target (T2) for a 19.7% gain and continued to fall about a third of the way to T3 before reversing.  From there, VHI went on to put in a large double-top high (viewed on the weekly chart below) and has been in a relentless downtrend since.

The basis for the current long-side trade is based on the fact that VHI has fallen to just above the 6.50 support level while extremely oversold. Prices have been falling within a steep descending channel (daily chart) and have reached extreme oversold levels. With bullish divergences in place below a bullish falling wedge on the 2-hour chart, the chance for an oversold bounce as well as a short-covering rally is quite elevated at this time. I plan to wait and see how the stock acts assuming support holds and prices reverse soon before finalizing my targets but my minimum initial target will be around 8.30 using a stop based on a R/R of no less than 3:1 on my average cost (I just started scaling in before the close today & will continue to add only if prices break above the 120 minute falling wedge pattern). Additional price targets will likely be added assuming the trade starts to pan out. Due to the above average volatility and unusually large profit & loss potential on this trade, my preference is to use a scale-in strategy and below average position sizing in this trade.