ASX Uranium and Lithium Scanning: VCP Pattern Leaders Analysis
- Anita Arnold
- Sep 18
- 6 min read
Updated: Sep 19
Understanding Momentum Leaders Through Systematic Scanning
When uranium miners move together and lithium stocks follow in formation, you're witnessing the power of sector momentum that drives Australian markets. This phenomenon isn't coincidence—it's the systematic behaviour that momentum traders study to identify emerging opportunities.
At Finer Market Points, our systematic analysis combines two proven methodologies: William O'Neill's Relative Strength Index approach and Mark Minervini's Volatility Contraction Pattern recognition. These frameworks help identify which ASX stocks are positioned for potential momentum moves.
The Foundation: RSI and VCP Scanning Methodology
William O'Neill's RSI Framework
William O'Neill, founder of Investors Business Daily and creator of the CANSLIM methodology, developed systematic approaches to identify the fastest-moving stocks. His Relative Strength Index methodology ranks stocks based on price performance relative to the broader market.
While RSI data is readily published for US markets through Investors Business Daily, ASX-specific data requires systematic analysis. Our approach applies these same principles to Australian markets, focusing on stocks showing superior relative performance.
Mark Minervini's Volatility Contraction Pattern
The Volatility Contraction Pattern represents one of the most reliable momentum setups in systematic trading education. Think of a basketball dropping and bouncing—each bounce becomes progressively smaller until the ball settles. Similarly, VCP formation shows decreasing volatility before potential breakout moves.
Key VCP Characteristics:
Contraction Sequence: Each pullback shows less volatility than the previous
Moving Average Relationship: Price action typically occurs around 10-day, 50-day, and 200-day moving averages
Volume Pattern: Declining volume during contractions, expanding on breakouts
Time Element: Contractions become progressively shorter in duration
Current ASX Momentum Leaders: Educational Analysis
Top RSI Performers This Week
Our systematic scanning revealed six companies showing exceptional relative strength, providing educational examples of momentum principles in action.
Energy Resources (ERA.ASX) - RSI 89.6
Energy Resources demonstrates classic VCP formation within the uranium sector. The pattern shows three distinct contractions, each tighter than the previous, before the eventual breakout above the 50-day moving average.
Educational Observation: The breakout occurred with what Gil Morales and Chris Kacher term a "pocket pivot"—higher volume above the 10-day moving average while both 10-day and 50-day moving averages sit above the 200-day line.
Novonix (NVX.ASX) - RSI 81.1
This lithium-focused company illustrates the extended VCP pattern, showing multiple contractions over several months. The systematic approach reveals how momentum builds through progressive tightening around key moving averages.
Pattern Recognition: The final contraction held above the 50-day moving average rather than falling below it, suggesting underlying strength before the eventual breakout on July 13th.
Paladin Energy (PDN.ASX) - RSI 96.0
Leading the RSI rankings, Paladin demonstrates how uranium sector momentum creates exceptional relative strength readings. The systematic progression from 45 cents to over one dollar exemplifies momentum acceleration principles.
Applying Fundamental Filters
Mark Minervini's approach combines technical patterns with fundamental strength criteria. When applied to ASX markets, this dual filter system identifies companies showing both technical momentum potential and underlying business strength.
Companies Meeting Both Criteria:
Aussie Broadband (ABB.ASX): Recent IPO showing strong fundamental metrics alongside technical breakout patterns
Chalice Mining (CHN.ASX): Demonstrates classic VCP formation with fundamental backing
Clinuvel Pharmaceuticals (CUV.ASX): Pocket pivot formation meeting systematic criteria
Sector Movement Psychology: "Stocks Move in Packs"
Understanding Thematic Momentum
The recent uranium and lithium sector movements demonstrate why systematic sector analysis proves more effective than individual stock selection. When Energy Resources breaks out, other uranium companies often follow similar patterns. This interconnected movement reflects:
Sector Psychology Factors:
Institutional Flow: Large investors moving into themes rather than individual stocks
Risk Assessment: Traders viewing sectors as risk units rather than company-specific opportunities
Momentum Cascade: Early leaders encouraging follow-through in related companies
Thematic Validation: Successful breakouts confirming sector-wide opportunity
Early Identification Principles
Our systematic approach focuses on identifying which company within a sector shows initial leadership characteristics. Liontown Resources (LTR.ASX) provides an educational example of this principle.
Timeline Analysis:
May 10th: Insider buying activity (Tim Goyder purchasing approximately $1 million)
May 14th: Investor presentation announcement
May 17th: Public presentation begins
May 27th: VCP breakout initiates sector-wide lithium movement
This sequence demonstrates how systematic monitoring of insider activity, combined with technical pattern recognition, can identify sector leadership before broader momentum develops.
Technical Education: Pocket Pivots and Moving Averages
Pocket Pivot Identification
Developed by Gil Morales and Chris Kacher, pocket pivots represent early-stage momentum signals within established patterns. The systematic criteria include:
Pocket Pivot Requirements:
Volume: Higher than any down day in previous 10 trading sessions
Moving Average Position: Close above 10-day moving average
Trend Context: 10-day and 50-day moving averages above 200-day line
Price Action: Close in upper portion of daily trading range
Moving Average Relationships
Understanding moving average interactions provides crucial context for momentum analysis:
50-Day Moving Average (Green Line): Acts as intermediate trend indicator 200-Day Moving Average (Red Line): Represents long-term trend direction10-Day Moving Average: Shows short-term momentum and pocket pivot reference
Recent IPOs like Cettire (CTT.ASX) and Aussie Broadband lack 200-day moving average data, requiring modified analysis approaches focusing on 10-day and 50-day relationships.
Risk Management in Momentum Trading
Position Sizing Considerations
Momentum trading education emphasises systematic risk management approaches rather than position-specific advice. Educational principles include:
Systematic Approaches:
Volatility Assessment: Understanding how VCP tightness affects risk parameters
Moving Average Stops: Using technical levels for educational risk frameworks
Sector Correlation: Recognising when multiple positions create concentrated sector exposure
Timeline Awareness: Understanding momentum cycle stages for position management
Educational Risk Frameworks
Mark Minervini's educational approach includes "throwback" concepts—where stocks briefly return to breakout levels before continuing upward movement. This provides educational context for normal momentum behaviour rather than cause for concern.
Throwback Education:
Normal Behaviour: 70% of successful breakouts show some throwback action
Volume Confirmation: Strong volume recovery indicates healthy throwback
Moving Average Support: Successful throwbacks often find support at breakout levels
Advanced Scanning Techniques
Systematic Monitoring Approach
Our comprehensive analysis methodology combines multiple screening criteria:
Technical Criteria:
RSI performance ranking across all ASX stocks
VCP pattern identification and stage analysis
Volume pattern assessment and breakout confirmation
Moving average relationship analysis
Fundamental Integration:
Mark Minervini's fundamental strength criteria
Insider trading activity monitoring
Sector thematic classification and trend analysis
Institutional flow and presentation timing
Technology Application
Modern momentum trading education leverages systematic scanning tools that process hundreds of stocks simultaneously. This comprehensive approach identifies patterns human analysis might miss due to time constraints.
Systematic Advantages:
Comprehensive Coverage: Analysis of entire ASX universe rather than limited watchlists
Pattern Recognition: Consistent application of VCP and pocket pivot criteria
Timing Analysis: Real-time identification of breakout confirmations
Sector Correlation: Understanding how individual patterns fit broader themes
Take Your Momentum Trading Education Further
The systematic approaches covered here demonstrate how combining proven methodologies creates comprehensive market analysis frameworks. Understanding VCP patterns, RSI relative strength, and pocket pivot identification provides foundation-level momentum trading education.
FMP YouTube members access the complete framework through our weekly 3030 Report, featuring:
✓ Specific ASX stocks exhibiting these patterns in real-time ✓ Detailed Launch Pad opportunity analysis (released to members 24+ hours before public)✓ Community discussions with Gary Glover and experienced momentum traders ✓ Ability to submit specific analysis requests for stocks showing early-stage patterns
This Week's 3030 Report Features: → Current VCP formations across uranium and lithium sectors → Systematic RSI rankings with fundamental filter overlay → Pocket pivot identification and confirmation analysis→ Sector rotation insights specific to ASX conditions
Complete Educational System: → 800+ video library covering every momentum concept and pattern → Weekly live analysis demonstrating real-time pattern recognition → Member community for strategy discussion and learning → Submit your specific VCP and momentum questions for analysis
Early Access Advantage: → Launch Pad opportunities identified 24+ hours before public release → Member-only alerts for significant pattern developments
[BECOME A YOUTUBE MEMBER - Access This Week's VCP Analysis]
Current members save 24+ hours on momentum opportunity identification through systematic scanning approaches
Key Takeaways
Systematic momentum analysis reveals why uranium and lithium stocks demonstrate pack-like movement patterns. The combination of William O'Neill's RSI methodology with Mark Minervini's VCP recognition creates comprehensive educational frameworks for understanding ASX momentum dynamics.
Remember that successful momentum education focuses on systematic pattern recognition rather than individual stock selection. The VCP formation process, pocket pivot identification, and sector correlation analysis provide educational foundations for understanding how Australian markets develop momentum cycles.
For traders interested in momentum education, understanding these systematic approaches offers significant advantages over reactive analysis methods. The 24-48 hour timing advantages created through systematic scanning demonstrate how comprehensive monitoring creates educational and practical benefits.
Continue developing your momentum trading education by exploring our related content on sector rotation analysis and Launch Pad pattern recognition.
Disclaimer: Finer Market Points Pty Ltd, CAR 1304002, AFSL 526688, ABN 87 645 284 680. This general information is educational only and not financial advice, recommendation, forecast or solicitation. Consider your objectives, financial situation and needs before acting. Seek appropriate professional advice. We accept no liability for any loss or damages arising from use.
Comments