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. How is accumulation area calculated?

    Explore the use of accumulation areas in the analysis of traded securities. Learn about on-balance volume and its role in ...
  2. How is the Accumulative Swing Index calculated?

    Learn how the accumulative swing index is calculated using swing index. Explore absolute value and how it is used in the ...
  3. What are the differences between a bar chart and candle sticks?

    Explore the difference between bar and candlestick charts. Learn how technical analysts use charts in the analysis of supply ...
  4. What is the difference between enterprise value and equity value?

    Valuating a business accurately depends heavily on the purpose of the valuation. Learn how enterprise value and equity value ...
RELATED TERMS
  1. Appraised Equity Capital

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

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

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

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

    A form of technical analysis that looks at the range between ...
  6. Money Flow Index - MFI

    A momentum indicator that uses a stock’s price and volume to ...
Related Articles
  1. How Trading Algorithms Are Created
    Trading Strategies

    How Trading Algorithms Are Created

  2. Quants: What They Do and How They've ...
    Trading Strategies

    Quants: What They Do and How They've ...

  3. An Introduction To Price Action Trading ...
    Trading Strategies

    An Introduction To Price Action Trading ...

  4. Getting Market Leverage: CFD versus ...
    Investing Basics

    Getting Market Leverage: CFD versus ...

  5. Contract for Difference (CFD) Risks
    Trading Strategies

    Contract for Difference (CFD) Risks

Trading Center