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Coppock Curve by Edwin Sedgwick Coppock
rev. 01/06/97

The Coppock Curve was developed by Edwin Sedgwick Coppock in 1962. It was featured in the November 94 issue of Technical Analysis of Stocks& Commodities, in the article "The Coppock Curve", written by ElliotMiddleton.:

Taken from Stocks & Commodities, V. 12:11 (459-462): The Coppock Curve by Elliott Middleton

"We are creatures of habit. We judge the world relative to whatwe haveexperienced. If we're shopping for a mortgage and rates have been in the teens (asthey were in the early 1980s) and then drop to 10%, we are elated.If, however, they've been at 8% and then rise to 10%, we are disappointed.It all depends on your perspective.

The principle of adaptation-level applies to how we judge our income levels, stock prices and virtually every other variable in our lives. Psychologically, relativity prevails..

SIMPLEST FORMS

The moving average is the simplest form of adaptation-level. Moving average crossover rules accurately signal the onset of periods of returns outside the norm, whetherpositive or negative. This makes moving averagecrossovers useful totraders who want to get a boost on entering or exitingstocks or funds.

The oscillator is also based on adaptation-level, although in aslightlydifferent way. Oscillators generally begin by calculating a percentagechange of current price fromsome previous price, where the previous priceis the adaptation-levelor reference point. The mind is attuned to percentagechanges because theyrepresent returns. If youbought Microsoft Corp. stock(MSFT) at $50 and it goes to $80, youmake 60% before dividends. If you bought Berkshire Hathaway (BRK) at $4,000 and it rises to $4,030,the same dollar gain, you make 0.75% before dividends.It's the percentage change that counts. Relativity again.

Coppock reasoned that the market's emotional state could be determined by adding up the percentage changes over the recent past to get a senseof the market'smomentum (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 wesee that this month the market is up 15% over a year ago, last monthit was up 12.5% over a year ago, and 10%, 7.5% and5%, respectively, themonths before that, thenwe may judge that the marketis gaining momentum and, like a traderwatching for the upward crossover ofthe moving average, we may jump intothe market."

The MetaStock formula for the


Coppock Curve

(MOV(ROC(MOV(C,22,S),250,%),150,E))/100

 

e-w-Coppock_Curve.gif
Source / From: TOP
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