One of the patterns that I learned at Mark Minervini’s invaluable workshop is that of volatility contraction, or VCP. Before I learned of VCP, I would get out of a stock that had been rising when it went flat and all of the volume died out. I would get bored and think the rise was over. Little did I know that such a pattern can be a set-up for a large gain. You can read the best introduction to VCP through Minervini’s books. Minervini describes VCP as “a contraction of volatility accompanied by specific areas in the base structure where volume contracts significantly.” (Trade Like a Stock Market Wizard, p. 198, listed at the bottom of this blog.) Price volatility contracts from the left to the right and volume drys up after which a break-out may occur.
I think ACLX is in such a pattern. It had a huge gap up to an ATH in a GLB and has since consolidated. Note the reduced volume recently. I am waiting to see if ACLX will break out of this pattern on a burst of trading volume and have put in an alert in TC2000. ACLX is testing a promising anti-cancer treatment.
