๐๐๐ง๐๐๐๐จ๐งต: ๐๐ค๐ฌ ๐ฉ๐ค ๐พ๐๐ฉ๐๐ ๐ฝ๐๐ ๐๐ค๐ซ๐๐จ ๐๐ฃ ๐๐ฉ๐ค๐๐ ๐จ ๐ฌ๐๐ฉ๐ ๐
๐ช๐จ๐ฉ ๐๐ฃ๐ ๐๐๐ฉ๐ช๐ฅ โ ๐๐พ๐
๐ Bookmark this for reference & retweet.
๐๐๐๐ฉ ๐๐จ ๐๐พ๐?
VCP stands for Volatility Contraction Pattern
๐๐ฉ ๐๐๐จ 3 ๐ฅ๐๐ง๐ฉ๐จ:
โช๏ธ๐๐๐ฃ๐๐ ๐๐ญ๐ฅ๐๐ฃ๐จ๐๐ค๐ฃ
โช๏ธ๐๐๐ฃ๐๐ ๐พ๐ค๐ฃ๐ฉ๐ง๐๐๐ฉ๐๐ค๐ฃ
โช๏ธ๐ฝ๐ง๐๐๐ ๐ค๐ช๐ฉ
Think of it like a spring compressing before it BOOMS!
๐๐๐ฃ๐๐ ๐๐ญ๐ฅ๐๐ฃ๐จ๐๐ค๐ฃ: The price range is widening over time, showing increasing volatility.
๐๐๐ฃ๐๐ ๐พ๐ค๐ฃ๐ฉ๐ง๐๐๐ฉ๐๐ค๐ฃ:Price goes sideways in tighter and tighter ranges.
Institutional hands are loading up silently.
๐๐๐ ๐๐ค๐๐๐ (๐๐ช๐ฅ๐ฅ๐ก๐ฎ & ๐ฟ๐๐ข๐๐ฃ๐)
โช๏ธSellers get exhausted with each contraction.
โช๏ธSupply keeps drying up
โช๏ธBuyers remain steady.
โช๏ธDemand builds silently
โช๏ธBreakout happens when demand crushes supply.
๐๐ค๐ก๐ช๐ข๐ ๐พ๐ก๐ช๐๐จ
โช๏ธDuring contraction -> volume should dry up.
โช๏ธDuring breakout -> volume should explode.
โช๏ธThis validates the pattern.
The Contraction Principle (VCP + Volume)
In VCP, each contraction = volume dries further.
Last contraction = lowest volume.
Breakout = massive volume surge.
The 10 & 20 EMA are commonly used:
10 EMA: Helps track short term momentum.
20 EMA is a bit slower and acts as a short-term trend guide.
Final contraction in a VCP should ideally occur above the 20 EMA. This shows the stock is under accumulation and being supported by buyers.
๐๐ฃ๐ฉ๐ง๐ฎ ๐๐ฉ๐ง๐๐ฉ๐๐๐ฎ:
โช๏ธ๐๐๐๐ฉ ๐๐ค๐ง ๐๐ฃ๐จ๐๐๐ ๐๐๐ง ๐๐๐ฉ๐๐ง ๐๐ค๐ฃ๐ฉ๐ง๐๐๐ฉ๐๐ค๐ฃ.
โช๏ธ๐๐ฃ๐ฉ๐๐ง ๐๐๐ค๐ซ๐ ๐ฅ๐ง๐๐ซ๐๐ค๐ช๐จ ๐๐๐๐.
โช๏ธ๐๐๐๐ฅ ๐จ๐ฉ๐ค๐ฅ ๐ก๐ค๐จ๐จ ๐๐ฉ ๐ฅ๐ง๐๐ซ๐๐ค๐ช๐จ ๐๐๐ฎ ๐ก๐ค๐ฌ.
๐๐ญ๐๐ฉ ๐๐ข๐๐ง๐ฉ ๐ง ๐
โช๏ธSell 50% at +15% (or after 3 days)
โช๏ธRaise stop to cost after 3โ5% move in favor.
โช๏ธTrail the rest with 10 & 20 ๐๐๐ผ
โช๏ธIf price goes parabolic, lock in gains early.
โช๏ธAvoid greed - ๐๐ค๐ฃ๐จ๐๐จ๐ฉ๐๐ฃ๐๐ฎ > ๐ฅ๐๐ง๐๐๐๐ฉ๐๐ค๐ฃ
Failure Signs ๐จ
โช๏ธBreakout with weak volume
โช๏ธWide bearish candle inside the base
โช๏ธClosing below EMA
๐๐๐๐ฃ ๐ก๐๐ ๐ ๐ ๐ฅ๐ง๐ค:
โช๏ธStock trading within 25% of its 52-week high
โช๏ธUp at least 20% in the last 1 month & 30% in the last 3 months
โช๏ธSector Strength : Focus on stocks from leading or emerging strong sectors.
Find โyoung stocksโ breaking out of fresh bases.
Example
โช๏ธStrong Rally First -> After a sharp move, sellers became active.
โช๏ธVolume Declining -> With each contraction, supply kept drying up.
โช๏ธHigher Lows -> Buyers stayed steady while sellers got exhausted.
โช๏ธTighter Base -> Price squeezed into a narrow range.
โช๏ธStock made multiple contractions with volume drying up.
โช๏ธEach base was tighter than the previous one.
โช๏ธFinally, a strong breakout with volume expansion.
โช๏ธClassic example of how VCP works in practice.
โช๏ธClear series of contractions & consolidations.
โช๏ธNotice how the volatility reduces before the big move.
โช๏ธBreakout happened with volume + price strength.
โช๏ธPicture-perfect VCP setup in action.
โช๏ธStrong Rejection at Top -> After the rally, sharp selling appeared.
โช๏ธBuyers Step In -> Demand showed up near support zones.
โช๏ธVolume Falling -> Each contraction showed supply drying up.
โช๏ธTighter Consolidation -> Price compressed in a narrow range.
๐๐๐ง๐ ๐๐ฉ ๐๐ค๐ฃ๐๐๐ฉ๐๐ค๐ฃ๐จ ๐ข๐๐ฉ๐ฉ๐๐ง.
โช๏ธThis works BEST when index is above 10 & 20 EMA.
โช๏ธFlat or bear markets? Avoid.
๐๐ง๐ค ๐๐๐ฅ:
๐๐ค๐ก๐ก๐ค๐ฌ ๐ข๐ @mohitrai55 ๐๐ ๐ฃ ๐๐ ๐ฃ๐ ๐ก๐ฃ๐๐๐๐ฆ๐ ๐ฅ๐ฃ๐๐๐๐๐ ๐ฅ๐๐ฃ๐๐๐๐ค - ๐๐๐๐ ๐โโ, ๐๐๐๐๐ค & ๐ฃ๐๐ง๐๐ฃ๐ค๐๐๐ค ๐
Share this Scrolly Tale with your friends.
A Scrolly Tale is a new way to read Twitter threads with a more visually immersive experience.
Discover more beautiful Scrolly Tales like this.