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MetaStock
Indicator - Coppock
Curve
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 Elliot Middleton.:
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
what we have experienced. If we're shopping for a
mortgage and rates have been in the teens (as they
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,
whether positive or negative. This makes moving
average crossovers useful to traders who want to
get a boost on entering or exiting stocks or
funds.
The oscillator is
also based on adaptation-level, although in a
slightly different way. Oscillators generally
begin by calculating a percentage change of
current price from some previous price, where the
previous price is the adaptation-level or
reference point. The mind is attuned to percentage
changes because they represent returns. If you
bought Microsoft Corp. stock (MSFT) at $50 and it
goes to $80, you make 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 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."
The MetaStock™
formula for the Coppock Curve is:
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(MOV(ROC(MOV(C,22,S),250,%),150,E))/100
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