Thread by @SakatasHomma

The greatest trader of our generation:

Mark Minervini.

2 Time USIC champion (1997 & 2021).
A return of 33,554% from 1994 to 1999 (~220% a year).

Mark's secret sauce?
VCP: Volatility contraction pattern.

Here is explain:
What is a VCP? &
How to count the Ts correctly?

1/n twitter.com/i/web/status/1…

What is a VCP?

VCP is a characteristic of a constructive base, in which there is a decrease in the price swing from a pivot high to a pivot low (measured in terms of %) inside a base from left to right; before eventually breaking out

Beautiful VCP in Olectra Greentech.

2/n

VCP appears in many chart patterns viz. symmetrical triangle, an ascending triangle, a descending triangle, the mast of a flag, and many other places.

Each contraction is called Ts (due to its shape)
See an ongoing VCP in BVCL: 2nd T

3/n

A perfect VCP has these 5 salient characteristics:

1. A prior uptrend

Without a prior uptrend, even if the base displays all the VCP characteristics, it might not result in a breakout.

JSW Energy: An reversal Base, ready for a trend reversal. But NOT a VCP.

4/n

2. Contraction in Price volatility in each Ts:

3. Contraction in Time taken for each Ts:

4. Volumes dry up from the pivot high to the pivot low.

5. Volumes dry up from the left to the right side on each subsequent correction:

Eg: ECLERX

5/n twitter.com/i/web/status/1…

How many contractions can occur?

In theory, any number of Ts.

A rectangle has just 1 T.
a Cup & Handle has 2 Ts
Triangles have 3 or more
The Flag Mast can have anywhere from 2 to 5-6

But, what comes after the T?

6/n twitter.com/i/web/status/1…

what comes after the contraction?

Price EXPANSION. YES

Mark positions himself to catch this explosion right at the beginning of the expansion.

A rule of thumb is that a good break out should come around 2/3rd of the length of the base (see example in Olectra below).

7/n twitter.com/i/web/status/1…

In which timeframe does VCP occur?

They are fractals.

Like everything in the markets (& life), VCPs also occur in all timeframes.

see examples of VCP in monthly & Intraday

8/n twitter.com/i/web/status/1…

Can we scan for VCPs?

Yes.

Here is my best attempt.
This scanner scans for VCP in a larger timeframe. If you want to find VCPs in a smaller timeframe, you can do that by adjusting the timeframes.

9/n

chartink.com/screener/shvcp… twitter.com/i/web/status/1…

If you understood VCP:

1. Follow me @SakatasHomma for more of these

2. RT the tweet below to share this thread with your audience



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10/10
End 🧵🧵🧵

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