📊 Price Action · Breakout base
Volatility Contraction Pattern (VCP)
Mark Minervini's VCP: 2–4 progressively tighter pullbacks within a base, culminating in a low-volume dry-up. Buy on the breakout of the last contraction with a stop below the tightest low.
Setup
- Chart: daily candles on liquid growth stocks or leading sectoral names
- Identify a base forming after a strong prior uptrend (30%+ move over prior 3-6 months)
- Within the base, look for 2-4 pullbacks where each successive pullback is SHALLOWER than the last
- Volume should dry up progressively — final contraction on very low volume ("volume dry-up")
Entry
Enter on the breakout candle above the base's resistance, confirmed by volume ≥ 1.5× the base's average. The breakout should occur AT or shortly after the tightest contraction.
Exit
Take partial profits at 20-25% gain. Ride the balance with a trailing stop below rising swing lows.
Stop-loss
Below the low of the tightest (final) contraction. This is Minervini's "line in the sand" — a break below invalidates the pattern entirely.
When it works
- Base forms in a strong overall bull market with sector strength
- Volume dry-up in the last contraction is very clear
- Stock is a leader in its space with strong fundamentals (though this catalog is technical-only)
When it fails
- Deteriorating pattern — pullbacks getting wider instead of tighter
- Breakout on weak volume — often reverses
- Bear-market regime where all bases eventually fail
General trading rules that apply
Regardless of the specific setup, these apply to every strategy on this site:
- Never risk more than 2% of your account on a single trade
- Place a hard stop-loss before entering — no exceptions
- Journal every trade: setup, reason, outcome, one lesson
- After two consecutive losses, stop for the session
- Backtest and paper-trade for a month before deploying real capital
Every strategy here is part of our in-house catalogue, written and calibrated for Indian markets. Past behavior does not guarantee future results. Charts run against 2-year Nifty data — actual results in your account will vary. Backtest, paper-trade, and size responsibly before risking real capital.