The indicator was created by Edwin Coppock and was first published in Barron's Magazine in 1962.
The Episcopal Church asked Coppock if he could develop an indicator capable of identifying long-term buying opportunities. Coppock took the unusual line of thought by comparing market downturns to bereavements and consulted the bishops of the church regarding the average length of time people required to recover emotionally from a close bereavement.
He was told that it would usually take 11 to 14 months and so he used these time frames in his calculation.
The actual formula is
Coppock = WMA[10] of (ROC[14] + ROC[11])
which in plain English is the 10-month weighted moving average of the sum of the 14-month Rate of Change and the 11-month Rate of Change.
A buy signal is generated when the indicator is below zero and starts to turn upwards out of i's trough. There are no sell signals.
Due to the fact that the Coppock Indicator is based on averages it does not actually pick a market bottom but does help investors by helping to identify when a rally has been established.
