The Volatility Contraction Pattern (VCP) was popularized by Mark Minervini. It forms when price volatility and volume contract over time, setting up a powerful breakout.

What is a VCP?

Each pullback is smaller than the last, showing sellers are drying up. The result? A tightening base where demand quietly builds up.

Why VCP Matters

– Smaller Pullbacks: Example: 25% > 15% > 8% – Volume Drops: Each contraction has lower volume – Tight Base: Low volatility near the pivot – Breakout: Surge in volume confirms demand

Key VCP Elements

1. Look for a stock in a Stage 2 uptrend. 2. Identify 3-4 smaller contractions. 3. Watch volume fall with each dip. 4. Confirm a tight base and breakout point.

How to Spot a VCP

Enter as price breaks above the pivot with strong volume. Set a stop just below the last low. Risk is tight, reward can be massive.

Entry Strategy

– 60-70% of VCP breakouts succeed in bull markets – Common in stocks that gain 100%+ in a year – Breakouts often accompanied by 30-40% volume surge

VCP Success Rate

– Early fear: Sellers dominate – Consolidation: Smart money accumulates – Tight base: Confidence grows – Breakout: Demand overwhelms supply

Psychology Behind VCP

– Cup with Handle: Slower base, institutional buildup – Double Bottom: Undercuts weak hands – High Tight Flag: Fast, risky surge – VCP: Tighter, controlled, low-risk entry

VCP vs. Other Patterns

Use tools like Deepvue: – Track RMV (Relative Measured Volatility) – Run Minervini Power Play scans – Focus on strong 3- and 6-month trends

Scanning for VCPs

– Risk: 5-8% – Reward: 15% to 100%+ – Often found in growth sectors: tech, healthcare, consumer

Risk-to-Reward

VCP is a powerful tool for traders seeking high-probability breakouts. Master it, and you’re trading with the smart money.