What is the Coppock curve?

By Tony Daltorio AAA
A:

Technical analysis claims the ability to forecast future movements of financial instruments, such as stocks or commodities, through the study of past market data. By graphically portraying data, like price and volume, on a chart and analyzing it, future price movements can be discerned.

The Coppock curve was first published in Barron's in 1962 by Edwin Coppock. Originally designed as a technical analysis indicator for the S&P 500 index, the Coppock curve can be easily applied to other stock market indexes.

The Coppock curve is a long-term price momentum indicator used primarily to recognize major bottoms in the stock market. Most technical market analysts consider the Coppock curve to be an excellent tool for discriminating between bear market rallies and true bottoms in the stock market. The indicator was designed for use on a monthly time scale and is calculated as a 10-month weighted moving average of the sum of the 14-month rate of change and the 11-month rate of change for the index.

The stock market normally has rounding tops, but spike bottoms, which the Coppock curve is very good at identifying. A buy signal is generated when the indicator falls below zero and turns upward from a trough. Because the Coppock curve is a trend-following indicator, it does not pick an exact market bottom. However, it is excellent at showing established rallies and revealing when a new bull market has begun.

(For more on this topic, read Exploring Oscillators and Indicators: Introduction.)

This article was answered by Tony D'Altorio.

RELATED FAQS

  1. What are the best technical indicators that complement the Relative Vigor Index (RVI)?

    Discover some of the best technical indicators that traders and analysts can employ to supplement the use of the relative ...
  2. What are the best technical indicators that complement the Relative Strength Index ...

    Learn some of the best additional technical indicators that can be used along with the relative strength index to anticipate ...
  3. What is a common strategy traders implement when using the Relative Strength Index ...

    Read about some of the many uses of the Relative Strength Index (RSI), and learn about basic strategies traders implement ...
  4. How are Rising Three Methods patterns interpreted by analysts and traders?

    Understand the basics of the rising three methods candlestick pattern and how this strong continuation signal is interpreted ...
RELATED TERMS
  1. Intraday Momentum Index (IMI)

    A technical indicator that combines aspects of candlestick analysis ...
  2. Appraised Equity Capital

    The excess of the market value of an asset over its book value. ...
  3. Asset Valuation Review (AVR)

    A process that establishes an estimate of the value of a failed ...
  4. Derived Investment Value (DIV)

    A valuation methodology used to calculate the present value of ...
  5. Forex Spread Betting

    A category of spread betting that involves taking a bet on the ...
  6. Mass Index

    A form of technical analysis that looks at the range between ...

You May Also Like

Related Articles
  1. Active Trading Fundamentals

    Minute-to-Minute Trade Signals for Today's ...

  2. Investing

    How to Short Alibaba

  3. Technical Indicators

    Organize Price-Band Relationships In ...

  4. Trading Strategies

    Risk Management Techniques For Shorting ...

  5. Trading Strategies

    Day's First Trade Can Serve As Support/Resistance

Trading Center