Coppock Curve

Name Type Prerequisite Use Cases
Coppock Curve (CC) Momentum WMA Long-term investment timing in broad indices.

Definition

The Coppock Curve is a long-term price momentum indicator used primarily to identify major bottoms in the stock market. It 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. Although designed for monthly data, it can be applied to other timeframes.

Mathematical Equation

\[ ROC_{14} = \frac{Price_t - Price_{t-14}}{Price_{t-14}} \times 100 \]
\[ ROC_{11} = \frac{Price_t - Price_{t-11}}{Price_{t-11}} \times 100 \]
\[ \text{Coppock} = WMA_{10}(ROC_{14} + ROC_{11}) \]

Special cases

  • Maximum possible value: Unbounded
  • Minimum possible value: Unbounded
  • Behavior: Oscillates around zero, primarily used to identify long-term buying opportunities.

Visualization

Coppock Curve

Trading Significance

  1. Trend Signal: The primary signal is generated when the Coppock Curve rises from below zero into positive territory. This is interpreted as a "buy" signal for a new long-term bull market.

  2. Zero Line: While crossing above zero is the main signal, remaining above zero generally confirms a bullish trend, and falling below zero indicates a bearish phase.

  3. Divergence: Though less common, divergence analyses can also be applied.