Coppock Curve Oil Technical Analysis and Coppock Curve Trading Signals

Developed by Edwin Sedgwick Coppock

This technical technical indicator was used for technical analysis of Stocks & Commodities in the beginning but was later used to trade Oil Trading.

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

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

Oil Technical Analysis & How to Generate Trading Signals

In oil trading, The moving average is the simplest form of an adaptation-level, the crude oil 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 crude oil price from some previous crude oil price point, where the previous crude oil price point is the reference point (adaptation-level).

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

For example, If we compare oil prices relative to a year ago and we see that this month the crude oil market is up 20% compared to a year ago, last month it was up 15% over a year ago, and 10 %, 7.5% & 5% respectively the months before that, then we might determine that the crude oil market is gaining momentum.

Basic signals can also be generated using the Coppock Curve to trade market reversals from extreme crude oil price levels. Looking for divergence and oil 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 crude oil markets trading.

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