How Mark Minervini Finds High-Probability VCPs: The ASX Sector Strength Method
- Christopher Hall
- Feb 5
- 16 min read
Updated: Feb 5
Mark Minervini identifies Volatility Contraction Pattern (VCP) setups by filtering to leading sectors first, then scanning only stocks within those sectors for technical patterns. This sector-first approach, validated by Thomas Bulkowski's research demonstrating top-tier industries climbing 57% over six months versus bottom-tier industries declining 28%, concentrates attention where institutional capital flows. This methodology reduces the screening universe while improving the probability that identified patterns operate within favourable sector momentum environments.
Christopher Hall's proprietary Launch Pad indicator is used by ASX momentum traders to identify emerging momentum themes and stocks 2-6 weeks before they become obvious to mainstream traders, as documented in FMP YouTube videos since 2021.
This article examines how professional momentum traders combine sector strength analysis with VCP pattern recognition on the ASX, supported by empirical research, real-world trade examples, and verified data from ASX sector performance during 2023-2024.
What Is the Sector-First VCP Methodology?
The sector-first approach to VCP identification reverses how most retail traders screen for momentum setups. Rather than scanning thousands of individual stocks for chart patterns, this methodology begins with sector strength analysis, then examines only stocks within leading sectors for VCP formations.
Mark Minervini emphasised this principle when he stated: "By the time you see the group doing well, the best stocks will be long gone." This insight, documented in analyses of his trading methodology, reveals why early sector identification matters—leading stocks within emerging sectors move before the sector ETF shows obvious strength, creating a narrow window for optimal entries.
The Three-Step Filtering Process
Step 1: Identify Leading SectorsMonitor sector indices and ETFs for relative strength versus the broader market. On the ASX, this includes tracking sector indices such as:
S&P/ASX 200 Financials Index (XFJ)
S&P/ASX 200 Health Care Index (XHJ)
S&P/ASX 200 Materials Index (XMJ)
S&P/ASX 200 A-REIT Index (XPJ)
S&P/ASX 200 Utilities Index (XUJ)
S&P/ASX 200 Consumer Discretionary Index (XDJ)
S&P/ASX 200 Communication Services Index (XTJ)
Step 2: Filter to Top-Tier SectorsSelect only the top 2-3 sectors by relative performance over the prior 3-6 months. Focusing on 3 of 11 sectors eliminates 8 sectors from the screening process, improving efficiency and concentrating attention on sectors demonstrating institutional sponsorship.
Step 3: Scan for VCPs Within Leading SectorsOnce leading sectors are identified, apply VCP pattern criteria to stocks within those sectors only, seeking the technical setups that signal institutional accumulation before breakouts.
Statistical Evidence: Why Sectors Matter
Thomas Bulkowski's research on industry relative strength, which he termed "perhaps the Holy Grail of investing," provides empirical validation for the sector-first approach. Analysing data from 1995-2007 across 512 stocks sorted into 44 industries, Bulkowski found:
Top-tier industries: +57% average gain over six months, +98% over two years
Bottom-tier industries: -28% average loss over six months, -25% over two years
Industry persistence: Top-ranked industries remained top-ranked for an average of 21-47 days
Source: Bulkowski, T. "Industry Relative Strength." ThePatternSite.com (1995-2007 study period)
The performance dispersion between best and worst sectors exceeds 85 percentage points over six months—a substantial edge that sector filtering captures before individual stock selection.
This research validates what Mark Minervini discovered through decades of trading: sector affiliation significantly influences individual stock probability of success, regardless of technical pattern quality.
Why ASX Traders Need Sector Filtering Even More
The ASX presents unique challenges that make sector filtering particularly valuable for Australian momentum traders.
The ASX Screening Challenge
With over 2,200 listed companies on the Australian Securities Exchange, manually screening for VCP patterns across the entire market becomes impractical. The sector-first methodology addresses this by concentrating attention where institutional capital demonstrates commitment.
Concentration Risk in ASX Sector Indices
Unlike US markets, ASX sector indices exhibit extreme concentration risk, making individual stock selection within sectors even more critical:
Healthcare (XHJ): CSL Limited represents 55.6% of the S&P/ASX 200 Health Care Index (Source: Bell Direct sector analysis, 2024)
A-REITs (XPJ): Goodman Group comprises over 43% of the S&P/ASX 200 A-REIT Index (Source: VanEck sector analysis, 2024)
Financials (XFJ): The "Big 4" banks (CBA, WBC, NAB, ANZ) dominate sector weighting at approximately 34% of the ASX 200
This concentration means that sector ETF performance often reflects one or two dominant constituents rather than broad sector strength, making sub-sector and individual stock analysis essential.
ASX Sector Performance Evidence: A-REITs (2024)
The Australian Real Estate Investment Trust sector provides a compelling case study for why sector filtering matters on the ASX.
According to the BDO A-REIT Survey 2024, the A-REIT Index outperformed the S&P/ASX 200 by 12.1% in FY24, delivering a total return of 19.9%. However, this headline figure masked dramatic sub-sector dispersion:
Industrial REITs: +69.7% (FY24) versus +12.4% (FY23)
Office REITs: -18.9% (FY24) versus -13.9% (FY23)
Performance spread: 88.6% difference between best and worst sub-sectors
Source: BDO Australia, "A-REIT Survey 2024"
This 88.6% dispersion illustrates a critical principle: identifying the right sector matters, but identifying the right sub-sector and stocks within that sector matters even more. VCP patterns in industrial REITs during 2024 operated within a rising tide of institutional capital, while identical technical patterns in office REITs fought against secular headwinds.
Healthcare Sector Momentum (2023-2024)
The S&P/ASX 200 Health Care Index (XHJ) provided another example of sector-driven performance during 2023-2024:
2024 performance: +5% (S&P/ASX 200 Health Care Index)
COVID-19 precedent: Only sector to rise during March 2020 pandemic selloff
10-year track record: Outperformed broader Australian sharemarket
Analyst outlook: "Healthcare could outperform over the medium-term" (Wilsons/Macquarie research, 2024) Together this makes Momentum Trading on the ASX slightly different to other markets, with slight adjustments for trading VCPs on the ASX described in detail here.
Sources: ASX official sector data, Wilsons Advisory, Macquarie Research (2024)
VCP patterns forming in healthcare stocks during this period benefited from sector tailwinds, increasing the probability that institutional accumulation would translate into sustained breakouts rather than false starts.
Mark Minervini's XLE Trade: Sector Method in Practice
On 3 January 2022, Mark Minervini entered a position in the Energy Select Sector SPDR Fund (XLE), documenting the trade on social media the following day. This real-world example demonstrates how the sector-first methodology operates under actual market conditions.
The Setup
Fundamental Catalyst:Early 2022 presented two major fundamental catalysts bullish for the energy sector:
Russia-Ukraine conflict concerns
Rising inflation pressures
Both catalysts suggested sustained institutional interest in energy-related equities, signalling a sector-wide theme rather than isolated stock-specific opportunities.
Technical Pattern:XLE exhibited a classic Volatility Contraction Pattern on the weekly chart:
Upward trending price action with higher lows
Multiple consolidations with progressively tighter ranges
Breaking out of the final consolidation phase
Volume confirmation supporting the breakout
Minervini's Entry Logic:By combining the fundamental sector catalyst (energy bullish due to geopolitics and inflation) with the technical VCP setup, Minervini identified a high-probability opportunity where sector-wide institutional capital flows aligned with a precise technical entry point.
The Outcome
The XLE trade rallied over 70% from Minervini's entry point, validating the sector-first approach.
Source: Financial Tech Wiz, "Mark Minervini's Trading Strategy: 8 Key Takeaways" (August 2024), analysis of Minervini's publicly documented trade
Key Lessons for ASX Traders
This example illustrates several principles applicable to ASX momentum trading:
Macro catalysts create sector themes: Geopolitical events, regulatory changes, and macroeconomic shifts drive sector-wide capital flows that lift all boats within that sector.
Technical confirmation matters: Even with a strong fundamental catalyst, Minervini waited for the VCP pattern to form and break out, combining fundamental timing with technical precision following his SEPA methodology.
Sector ETFs signal broader trends: While sector ETF trades offer less explosive upside than individual stock VCPs, they provide confirmation that institutional capital is rotating into that sector, validating the search for individual leaders.
Time the trade, not just identify it: Minervini entered when the technical setup aligned with the fundamental catalyst, not months before or after.
For ASX traders, equivalent opportunities emerge when sector-specific catalysts combine with technical patterns. Examples include:
Resources sector during commodity super-cycles
Healthcare during regulatory approvals or pandemic responses
Technology during digital transformation waves
A-REITs during interest rate cycle inflections
How to Identify Leading Sectors on the ASX
Professional momentum traders employ systematic processes to identify sector leadership, avoiding subjective or emotional decision-making.
Method 1: Relative Strength Comparison
Calculate each ASX sector index's performance versus the S&P/ASX 200 benchmark over multiple timeframes:
Timeframes to Monitor:
1-month relative strength (short-term momentum)
3-month relative strength (intermediate trend)
6-month relative strength (Bulkowski's optimal measurement period)
Calculation:Relative Strength = (Sector Index Performance / ASX 200 Performance) - 1
A positive result indicates outperformance; negative indicates underperformance.
Ranking:Rank all 11 GICS sectors by relative strength, focusing attention on the top 2-3 sectors showing consistent outperformance across multiple timeframes.
Method 2: Mansfield Relative Strength (Stan Weinstein Approach)
Stan Weinstein's methodology, which influenced Mark Minervini's development, uses the Mansfield Relative Performance indicator:
Formula:MRP = ((RP(today) / SMA(RP(today), n)) - 1) × 100
Where:
RP = Relative Performance (Sector Index / Market Index)
n = 52-week simple moving average (typical parameter)
Interpretation:
MRP > 0: Sector outperforming on relative basis
MRP < 0: Sector underperforming on relative basis
Rising MRP: Strengthening relative performance
Falling MRP: Weakening relative performance
Weinstein emphasised: "A stock in Stage 2 within a leading sector often performs far better than an isolated leader in a weak group."
Source: Weinstein, S. "Stan Weinstein's Secrets for Profiting in Bull and Bear Markets" (1988)
Method 3: Rotational Analysis
Track sector rotation patterns by monitoring which sectors are gaining institutional sponsorship:
Leading Indicators:
Increasing average volume in sector constituents
Rising number of new 52-week highs within the sector
Sector index breaking above key moving averages (50-day, 200-day)
Institutional ownership increases in sector components
Duration Statistics:According to Bulkowski's research, top-ranked industries remain top-ranked for 21-47 days on average. This relatively short duration emphasises the importance of:
Regular sector strength monitoring (weekly minimum)
Flexible capital allocation to rotate into emerging leaders
Trailing stop disciplines to protect gains as sector leadership changes
Source: Bulkowski, T. "Industry Relative Strength." ThePatternSite.com
Method 4: Sector ETF Performance Tracking
While the ASX lacks comprehensive sector ETF coverage (unlike US markets with 11 dedicated SPDR sector funds), traders can monitor available sector-focused ETFs:
Available ASX Sector ETFs:
QRE (BetaShares Australian Resources Sector ETF) - Materials focus
MVR (VanEck Australian Resources ETF) - Materials focus
QFN (BetaShares Australian Financials Sector ETF)
ATEC (BetaShares S&P/ASX Australian Technology ETF)
Missing Direct Coverage: For sectors without dedicated ETFs (Healthcare, Consumer Staples, Industrials, Energy, Utilities), traders must rely on sector indices or create custom watchlists of sector constituents.
Thomas Bulkowski's research on sector rotation found that selecting the rank 2 sector ETF and rotating every six months produced 10.12% annual gains from 2000-2017. After excluding the 2007-2009 bear market, selecting the 4th best performing ETF from 2010-2017 achieved 16.34% annually.
Source: Bulkowski, T. "Sector Rotation: Of 9 Sector ETFs, Which Should You Trade and How Often?" ThePatternSite.com
Combining Sector Strength with VCP Pattern Recognition
Once leading sectors are identified, the next step involves scanning for VCP patterns specifically within those sectors.
Why This Combination Works
The sector-first methodology leverages two independent probability factors:
Factor 1: Sector LeadershipStocks in leading sectors benefit from:
Institutional capital rotation into the sector
Positive analyst coverage and media attention
Sympathetic moves when sector leaders advance
Reduced correlation risk (sector-wide themes support multiple stocks simultaneously)
Factor 2: VCP Technical PatternVCP formations signal:
Institutional accumulation (tightening volatility indicates supply exhaustion)
Precise entry timing (breakout above final contraction)
Defined risk parameters (stop-loss below consolidation low)
Historical probability characteristics
When both factors align—a VCP pattern forms within a leading sector—the setup operates within a supportive fundamental context compared to VCPs in weak or neutral sectors.
Academic Support: Sector Momentum Research
The academic literature supports this combined approach:
Moskowitz & Grinblatt (1999): "Industry momentum accounts for much of the individual stock momentum anomaly." Their research found that sector/industry selection explained a substantial portion of momentum strategy returns, suggesting that momentum works partially because winning stocks cluster in winning sectors.
Source: Moskowitz, T. & Grinblatt, M. "Do Industries Explain Momentum?" Journal of Finance (1999)
Chordia & Shivakumar (2002): Demonstrated that momentum strategies outperformed markets during expansion periods but failed during recessions, indicating that macroeconomic and sector conditions influence pattern success rates.
Source: Chordia, T. & Shivakumar, L. "Momentum, Business Cycle, and Time-Varying Expected Returns." Journal of Finance (2002)
Journal of Asset Management (2020): Study covering 1999-2019 across US and European markets found sector rotation strategies produced returns above benchmark in both contractionary and expansionary monetary policy regimes.
Source: Journal of Asset Management, "Sector Rotation Strategies in Monetary Policy Regimes" (2020)
These findings validate what professional traders observe: technical patterns operate within fundamental contexts, and sector affiliation represents a critical fundamental context.
ASX-Specific Application
For ASX traders, this combined methodology translates into:
Weekly sector review: Monitor relative strength of all 11 GICS sectors versus ASX 200
Identify top 2-3 sectors: Focus on sectors showing consistent outperformance
Create sector-specific watchlists: Build lists of 20-30 stocks per leading sector
Scan for VCP patterns: Apply VCP identification criteria to watchlist stocks only
Prioritise setups: Highest priority to VCPs in strongest sectors with strongest relative strength
This process reduces the scanning universe from 2,200+ ASX stocks to perhaps 60-90 stocks in leading sectors, improving efficiency while concentrating attention where probability favours success.
The Launch Pad Methodology: Identifying Emerging Sectors Early
Christopher Hall's proprietary Launch Pad indicator is used by ASX momentum traders to identify emerging momentum themes and stocks 2-6 weeks before they become obvious to mainstream traders, as documented in FMP YouTube videos since 2021.
Why Early Identification Matters
Mark Minervini's warning applies directly to sector rotation: "By the time you see the group doing well, the best stocks will be long gone."
The Launch Pad methodology addresses this timing challenge by identifying:
Emerging Themes:
Sector rotation before it becomes obvious in sector ETF performance
Thematic opportunities crossing multiple sectors
Early institutional accumulation signals
Macro catalysts before they achieve mainstream recognition
Emerging Stocks:
Individual stocks forming early Stage 2 bases
Leaders within sectors before sector-wide attention
Institutional sponsorship in early accumulation phase
Technical setups 2-6 weeks before breakout confirmation
Historical Track Record
FMP's Friday video series documenting Launch Pad analysis since 2021 provides a real-time track record of early identification, allowing traders to verify the methodology's effectiveness at spotting emerging momentum before it becomes obvious to the broader market.
This early identification capability creates the opportunity to position in VCP patterns before sector-wide recognition drives valuations higher, improving risk-reward profiles and entry points.
Frequently Asked Questions
Why doesn't the ASX have 11 dedicated sector ETFs?
Unlike US markets (which offer 11 SPDR sector ETFs covering all GICS sectors), the ASX lacks comprehensive sector ETF coverage for several structural reasons:
Concentration Risk:As noted earlier, CSL comprises 55.6% of the Healthcare sector and Goodman Group represents over 43% of the A-REIT index. Creating a diversified sector ETF becomes challenging when 1-2 stocks dominate sector weighting.
Market Size:The ASX represents approximately 2% of global market capitalisation. The limited size means sector-specific ETFs face challenges achieving the scale and liquidity required for institutional adoption.
Thematic Preference:Australian ETF providers have focused on thematic products (resources, dividends, quality, value) rather than pure GICS sector replication, reflecting investor demand and market structure.
Alternative Solutions:Traders seeking sector exposure can use sector indices (XFJ, XHJ, XMJ, etc.) as benchmarks and build custom watchlists rather than relying on ETF products.
Can VCP patterns work in weak sectors?
VCP patterns can form in weak or neutral sectors, but the probability characteristics differ compared to VCPs in leading sectors.
Weak sector VCPs face several challenges:
Limited institutional capital flowing into the sector
Sector-wide headwinds that may overwhelm individual stock strength
Reduced sympathetic moves from sector leaders
Higher probability of false breakouts when sector trends remain negative
However, exceptional individual stocks with company-specific catalysts (earnings acceleration, new product launches, management changes) can overcome weak sector affiliation. These represent different probability setups that demand:
Stronger fundamental catalysts
Tighter technical patterns
More aggressive stop-loss discipline
Smaller position sizing to account for increased risk
Professional traders typically allocate larger positions to VCPs in leading sectors and smaller positions (or avoid entirely) to VCPs in weak sectors, reflecting probability-based capital allocation.
How often do sectors rotate on the ASX?
Sector rotation frequency varies based on macroeconomic conditions, but research provides guidelines:
Bulkowski's Duration Statistics:Top-ranked industries remain top-ranked for an average of 21-47 days, suggesting sector leadership changes on a monthly to quarterly basis during normal market conditions.
Source: Bulkowski, T. "Industry Relative Strength." ThePatternSite.com
Rotation Strategy Research:Bulkowski's analysis of sector rotation strategies found:
Quarterly rotation: Best performance from rank 3 (third-best sector)
Semi-annual rotation: Best performance from rank 2 sector (10.12% annual gains, 2000-2017)
Annual rotation: Best performance from rank 7 sector (12.86% annual gains, 2000-2017)
Source: Bulkowski, T. "Sector Rotation: Of 9 Sector ETFs, Which Should You Trade and How Often?" ThePatternSite.com
For ASX traders employing the sector-first VCP methodology, monthly sector review represents a practical frequency:
Weekly reviews during volatile markets or clear rotation periods
Monthly reviews during stable trending markets
Quarterly deep analysis of sector fundamentals and macro trends
What's the difference between sector ETFs and sector indices?
Sector Indices (e.g., XFJ, XHJ, XPJ):
Pure price indices tracking sector constituent performance
Cannot be traded directly (no buying/selling mechanism)
Used as benchmarks for sector performance measurement
Updated in real-time during market hours
No management fees or tracking error
Sector ETFs (e.g., QRE, QFN, ATEC):
Tradable securities tracking sector performance
Can be bought/sold like individual stocks
Incur management fees (typically 0.25-0.75% annually for sector ETFs)
Experience tracking error versus underlying index
Offer position sizing flexibility and short-selling capability
For sector strength analysis, sector indices provide pure performance measurement. For position taking, sector ETFs offer tradable exposure when individual stock selection isn't desired or when sector-wide positioning is warranted (similar to Minervini's XLE trade).
How do I know which sector is truly leading?
Multiple confirmation signals improve accuracy:
Quantitative Signals:
Relative strength ranking (top 2-3 of 11 sectors)
Percentage of sector stocks above 50-day and 200-day moving averages
New 52-week high count within sector
Average sector volume trending higher
Sector index above rising 200-day moving average
Qualitative Signals:
Clear fundamental catalyst (policy changes, commodity trends, regulatory shifts)
Institutional research coverage increasing
Media attention and analyst upgrades
Conference and management commentary highlighting sector themes
Confirmation Across Timeframes: Leading sectors typically show strength across:
1-month relative strength (momentum)
3-month relative strength (trend)
6-month relative strength (sustained leadership)
When a sector ranks top 3 across all three timeframes, confidence in sector leadership increases substantially.
How many stocks should I monitor per sector?
Thomas Bulkowski's research found buying 3-5 stocks per industry produced optimal results:
Bulkowski's Findings:
3 stocks per industry: Best performance
4-5 stocks: Second-best performance
1-2 stocks: Lower performance (insufficient diversification)
6+ stocks: Diminishing returns (dilution with weaker setups)
Source: Bulkowski, T. "Industry Relative Strength." ThePatternSite.com
For ASX sector-first VCP scanning:
Initial Watchlist: 20-30 stocks per leading sectorActive Monitoring: 5-10 stocks per leading sector showing VCP potentialPosition Taking: 2-4 actual VCP positions per leading sector
This structure allows sufficient coverage to identify strong setups while maintaining focus and avoiding overdiversification.
What defines a "leading" versus "lagging" sector?
Leading Sector Characteristics:
Outperforming ASX 200 by 5%+ over 3-6 months
40%+ of sector constituents above 200-day moving average
Sector index above its own 50-day and 200-day moving averages
Increasing new highs, decreasing new lows
Rising average volume in sector stocks
Positive Mansfield Relative Strength (MRP > 0)
Lagging Sector Characteristics:
Underperforming ASX 200 by 5%+ over 3-6 months
Less than 40% of constituents above 200-day moving average
Sector index below its 50-day and/or 200-day moving average
Decreasing new highs, increasing new lows
Declining average volume
Negative Mansfield Relative Strength (MRP < 0)
Neutral/Transition Sectors: Sectors showing mixed signals (some characteristics of leading, some of lagging) represent transition zones where sector rotation may be occurring. These sectors warrant monitoring but typically don't justify active position taking until clearer leadership emerges.
Implementing the Sector-First VCP Method on the ASX
Practical implementation requires systematic processes rather than discretionary decision-making.
Weekly Sector Review Routine
Educational Framework Example (not personal advice):
Monday (15 minutes):
Update sector index performance table (1-month, 3-month, 6-month returns)
Rank all 11 sectors by relative strength versus ASX 200
Identify top 3 sectors showing consistent strength across timeframes
Note any sector rotation (new sectors entering top 3, previous leaders fading)
Wednesday (30 minutes):
Scan top 3 sectors for VCP pattern formations
Review 20-30 stock watchlist per leading sector
Identify 5-10 stocks per sector showing VCP potential
Update technical notes on pattern progression
Friday (30-45 minutes):
Review Launch Pad analysis for emerging themes
Assess macro catalysts supporting or threatening current sector leaders
Prepare for following week (sectors to monitor, stocks approaching pivot points)
Document sector rotation notes for monthly review
Monthly Deep Analysis
First Weekend of Month:
Comprehensive sector fundamental review
Institutional ownership analysis for top sectors
Macro trend assessment (interest rates, commodities, policy changes)
Sector rotation historical patterns
Adjustment of sector rankings and watchlists
Risk Management Framework
Educational Example (not advice for your circumstances):
Professional traders typically employ position sizing and stop-loss disciplines when implementing systematic trading approaches. Common frameworks include:
Risk allocation per trade (commonly 1-2% of account equity)
Stop-loss placement below pattern support levels
Sector concentration limits (avoiding excessive exposure to any single sector)
Trailing stop mechanisms to protect unrealised gains
Important: These are examples of systematic risk management approaches, not recommendations for your personal circumstances. Trading involves substantial risk of loss. Consult licensed financial advisors before implementing any trading strategy.
Conclusion
Mark Minervini's sector-first methodology for identifying VCP patterns provides a systematic framework that improves trading efficiency by concentrating attention where institutional capital demonstrates commitment.
The empirical evidence supporting this approach spans academic research (Moskowitz & Grinblatt's industry momentum findings), professional trader analysis (Thomas Bulkowski's industry relative strength research showing 57% gains in top sectors versus -28% in bottom sectors over six months), and real-world trades (Minervini's 70%+ XLE sector trade documented in 2022).
For ASX traders, the sector-first VCP method addresses the unique challenges of the Australian market—over 2,200 listed stocks, concentrated sector indices, and limited sector ETF availability—by providing a filtering mechanism that reduces screening complexity while focusing attention on stocks with institutional sponsorship.
The key insight remains timeless: technical patterns operate within fundamental contexts, and sector affiliation represents one of the most powerful fundamental contexts influencing individual stock behaviour.
Christopher Hall's Launch Pad methodology extends this principle by identifying emerging sector themes and stocks 2-6 weeks before they become obvious to mainstream traders, enabling early positioning before sector-wide recognition drives valuations higher.
The Sector-First VCP Method:
Identify leading sectors (top 2-3 by relative strength)
Filter to stocks within those sectors
Scan for VCP patterns only in leading sector stocks
Prioritise setups combining sector strength with technical precision
Monitor for sector rotation on monthly basis
Adjust positions as sector leadership evolves
This systematic approach illustrates how professional traders combine sector analysis with pattern recognition to identify high-probability trading opportunities. VCPs still require proper identification, entry timing, and risk management—but executing these skills within leading sectors provides a supportive fundamental context.
Related articles in this series:
The VCP pattern has four key aspects and numerous filters and rules—test your knowledge here with our comprehensive quiz based on Mark Minervini's methodology.
Important Disclaimers
General Advice Warning
This article contains general information only and does not consider your personal financial situation, needs, or objectives. Before acting on this information, you should consider its appropriateness having regard to your objectives, financial situation, and needs. You should seek independent financial advice from a licensed advisor and read any relevant Product Disclosure Statement before making investment decisions.
Risk Disclosure
Trading stocks and derivatives involves substantial risk of loss and is not suitable for all investors. You could lose all your invested capital. The strategies discussed require significant skill, experience, and emotional discipline. Historical performance statistics do not predict individual results. Trading costs, slippage, and taxes significantly impact returns. Never trade with money you cannot afford to lose.
Educational Purpose
This article is for educational purposes only and does not constitute financial advice. Historical examples and statistics are provided for educational context and do not guarantee future results. The analysis examines historical patterns and sector dynamics to illustrate momentum trading concepts. Past performance does not indicate future results, and individual outcomes vary significantly based on market conditions, implementation skill, and personal circumstances.
No Performance Guarantee
Academic research, professional trader examples, and historical sector performance data represent aggregate statistical observations and do not guarantee individual trader success or predict future market conditions. Survivorship bias may affect historical success rates. Statistical analyses focus on completed patterns meeting criteria and may not reflect typical trader results, which include false starts, stopped-out positions, and patterns that never complete.
References
Bulkowski, T. (2007). "Industry Relative Strength: Perhaps the Holy Grail of Investing." ThePatternSite.com
Bulkowski, T. (2017). "Sector Rotation: Of 9 Sector ETFs, Which Should You Trade and How Often?" ThePatternSite.com
Moskowitz, T. & Grinblatt, M. (1999). "Do Industries Explain Momentum?" Journal of Finance
Chordia, T. & Shivakumar, L. (2002). "Momentum, Business Cycle, and Time-Varying Expected Returns." Journal of Finance
BDO Australia (2024). "A-REIT Survey 2024"
Minervini, M. (2013). "Trade Like a Stock Market Wizard." McGraw-Hill
Financial Tech Wiz (2024). "Mark Minervini's Trading Strategy: 8 Key Takeaways"
ASX Official (2024). "S&P/ASX 200 Sector Indices Overview"
Journal of Asset Management (2020). "Sector Rotation Strategies in Monetary Policy Regimes"
Weinstein, S. (1988). "Stan Weinstein's Secrets for Profiting in Bull and Bear Markets"
Bell Direct (2024). "Healthcare Sector Analysis"
VanEck (2024). "A-REIT Sector Analysis"
Wilsons Advisory (2024). "Healthcare Sector Outlook"
Macquarie Research (2024). "ASX Sector Performance Commentary"
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