Is VCP applicable to LEO?
What is VCP? VCP stands for Volatility Contraction Pattern. I learned this technical indicator sometime in 2016 after suffering a 98% annual loss in my 200,000 PHP portfolio in trading stocks in the Philippine Stock Exchange. The term was coined by Mark Minervini.
The idea in VCP is that after an initial bull run in a particular stock, it will soon be followed by a series of decreasing corrections. Let us say, for instance, that MEG increased 200% within a month. After that huge rally, it is expected that buyers will get exhausted and holders will start to take profit. As an outcome of such sentiment, it is but natural to see a correction. Typically, you will see a shooting star at the end of such a rally.
The appearance of a shooting star after a prolonged rally is a bearish indicator. This is exactly what we see in LEO after a month of uptrend from 13 July to 13 August.
How about VCP? What role does it play in the ongoing rally of the LEO token?
Despite the massive correction that followed after a 1,140% price appreciation from 0.10 SWAP.HIVE to 1.24 SWAP.HIVE, I agree that the general sentiment about the token remains bullish and positive. Both the creation of SURGE and LSTR support this thesis.
The idea of VCP is that the percentage of correction will continue to decrease, let’s say from 30% to 20% and then to 10% down to 5% or less. Such a correction is usually associated with decreasing volume. Soon, the profit takers will get exhausted, and the bulls will overpower the sellers. With 
Let us see how such a correction applies to LEO from 13 August to 01 September. So far, in the first chart above, we observe at least three major corrections. The first correction is from 1.24 on 13 August to 0.87 on 15 August. In just three days, LEO retraced 29.83%.
The second correction is from 1.04 down to 0.57. That’s from 16 to 22 August, when LEO retraced 45.19%. VCP appears inapplicable, for the percentage of the second correction is higher than the first.
How about the third correction? From 23 August to 29 August, LEO retraced from a high price of 0.60 SWAP.HIVE down to 0.45 SWAP.HIVE. That’s a 25% correction. That is still big. I am expecting either a consolidation or a 3% to 5% correction in the coming days. In this kind of game, only the patient and those who have a long-term mindset win.
How about volume? Is it shrinking? I don’t see such a reduction in volume. It remains relatively stable.
My conclusion is that, though VCP can be used as a guide to interpret the current direction in the price of LEO, the details of this technical indicator seem to evade the current sentiment in this impressive Hive Engine token.
As for me, I already sold 500 LEO when the price reached 1.10 SWAP.HIVE and sold another 500 LEO at 0.63 SWAP.HIVE. I used the profit I gained by buying 30 SURGE and 10 LSTR. The SURGE play has three distinct benefits: stability, passive income, and future speculation. I wrote about it two weeks ago.
My current stake is 3,000 LEO, while at the same time, I am still holding 1,000 liquid LEO. The first is for the long term, and the 1,000 LEO is for a speculative play and to secure the profit. With LEO’s current price of 0.50 SWAP.HIVE, I stopped selling. If LEO goes down below 0.40 SWAP.HIVE, I will be a buyer.
As mentioned above, I anticipate that in the coming days and weeks, a prolonged consolidation will follow. Such consolidation is healthy for the resumption of the bullish run.