VCP (Volatility Contraction Pattern)
Mark Minervini's base pattern where price contractions tighten progressively before a breakout.
VCP — short for Volatility Contraction Pattern — is a base pattern popularised by US trader Mark Minervini that often precedes the strongest swing-trading breakouts. It looks like a stock first pulling back sharply, then a series of progressively shallower pullbacks, ending in a tight zone right under prior resistance.
What you're looking for
- Three or more contractions, each smaller in percentage depth than the previous (e.g. 25% → 12% → 6% → 3%).
- Volume drying up in each successive contraction — fewer hands trading, lower average volume than the 50-day average.
- The stock is in Stage 2 (uptrend on weekly chart, above key moving averages).
- A clear pivot just above the most recent tight zone — the price level the breakout is measured from.
Why it works
VCP is essentially supply being absorbed. Each smaller contraction means weaker hands giving up on the prior decline, while determined buyers patiently accumulate. When supply finally exhausts, even modest demand can push price through the pivot — and the move is fast because there are few sellers left at higher prices.
How Swing Edge detects it
The Pre-Breakout scanner looks at the last 6–12 weeks of price action, counts pullback episodes, measures their depths, and confirms volume contraction during each. Stocks that meet the criteria show a VCP score contributing to their final pre-breakout rating.
Common mistakes
- Calling V-shape recoveries "VCP" — a true VCP has multiple visible contractions, not a single dip.
- Ignoring the volume signature. Tight price without volume dry-up is just a sideways drift, not absorption.
- Buying before the pivot. The setup is "ready" but not "trigger"; entries are at or just after the pivot break.