Analyst support: Coppock Index

The Coppock Curve was developed by Edwin Sedgwick Coppock in 1962. In its original form it is based on comparing the current price with the price a year ago. All yearly changes over the past 12 months are averaged exponentially to arrive at a plotted value. This procedue is repeated for each point on the curve.

"Coppock reasoned that the market's emotional state could be determined by adding up the percentage changes over the recent past to get a sense of the market's momentum (and oscillators are generally momentum indicators ). So if we compare prices relative to a year ago - which happens to be the most common interval - and we see that this month the market is up 15% over a year ago, last month it was up 12.5% over a year ago, and 10%, 7.5% and 5%, respectively, the months before that, then we may judge that the market is gaining momentum and, like a trader watching for the upward crossover of the moving average, we may jump into the market."

(see November 94 issue of Technical Analysis of Stocks & Commodities)

The Analyst allows you to pick any period (in weeks) for this indicator. A momentum calculation with the chosen period is performed on the 5 day moving average of the price curve. This is then exponentially averaged and plotted.


Determining buy and sell signals from a Coppock Curve

Reversals from extremes.

The Coppock was originally intended to generate buy signals. The suggested signal was an upturn in the Coppock Curve from an extreme low. Downturns in the Coppock can equally be used to provide sell signals.

Divergence analysis - weakening advances.

The initial thrust off a low in the stock market is often accompanied by the highest Coppock Curve reading (peak momentum). Subsequent advances tend to be accompanied by diminishing momentum (lower peaks on the Coppock Curve). That combination of a higher peak in price accompanied by a lower peak in the Coppock Curve creates a bearish divergence. Those signals warn of a weakening, aging advance, but often precede the ultimate top.

Method :

To draw the Coppock plot on a new analysis chart, select an active chart (click on an existing chart) then choose Coppock from the analysis selector in the toolbar. A dialog box will appear. Pick the desired period in weeks and press OK. (Note: The first analysis plot is always drawn on a new chart). A parallel Coppock chart is drawn beneath the base chart. Scaling and resizing either chart is reflected in the other so that both may be easily compared. Use RefreshChartRefresh to realign the charts at any time.

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