A market that is believed to have the potential to make a strong move in one direction after being pushed in the opposite direction. The idea is that if a market should be headed in one direction based on its fundamentals but is pushed in the other direction, it will eventually make a strong move in the original fundamental direction. This coiled move will often be more substantial than what might have been the case if it had gone in the expected direction to begin with.
Coiled markets often arise when the market has been held down artificially. This happens in commodities markets, such as gold and silver. Investors looking to capitalize on coiled markets will use both fundamental and technical analysis to identify markets or specific equities that exhibit the characteristics of a coiled market.
The origins of this term relate to the physics of a coiled spring: the more it is compressed, the greater the rebound will be.