Coppock Curve Stock Indices Technical Analysis & Coppock Curve Stock Indices Signals

Developed by Edwin Sedgwick Coppock

This indices technical technical indicator was used for technical analysis of Stocks & Commodities in the beginning but was later used to trade Stock Indices.

The principle behind this is the psychology of trading, based on the theory that human habit is predictable. And stock index price movement always oscillates in a zigzag manner.

The principle of adaptation-level applies to how stock index price reacts at certain levels, stock and stock index prices will react in the same way or pattern as those observed historically.

Stock Indices Technical Analysis & How to Generate Signals

In stock index trading, The moving average is the simplest form of an adaptation-level, the stock index price will oscillate around the moving average. This forms the basis of this indicator, which is a longer term oscillator based on this adaptation-levels(moving average), but in a different way.

Oscillators usually begin by calculating a % change of the current stock index price from some previous stock index price point, where the previous stock index price point is the reference point (adaptation-level).

Edwin Coppock reasoned that the stock indices market participants' emotional state could be quantified by summing up the % changes over the recent past to get a general sense of the stock indices market's longer term momentum.

For example, If we compare stock index prices relative to a year ago and we see that this month the stock indices market is up 20% compared to a year ago, last month it was up 15% over a year ago, & 10 %, 7.50% & 5% respectively the months before that, then we may ascertain that the stock indices market is gaining momentum.

Basic signals can also be generated using the Coppock Curve to trade market reversals from extreme stock index price levels. Looking for divergence and stock indices trend line breaks may also be combined to confirm the signal.

Implementation

The input levels of this indicator might need to be adjusted to better fit the dynamic nature of the stock indices markets trading.

Coppock Curve has a zero line reference point, but this doesn't represent the adaptation-level but it's only a visual reference point only.