Locking into a rising Coppock

‘It is a truth universally acknowledged, that a single man in possession of a good fortune, must be in want of a wife‘.

Recognise that line – one of the most famous first lines of a novel in publishing history and the opening line of one of my favourite books, Pride & Prejudice by Jane Austen. Imagine the moment when she came up with that line. Did she realise what a killer it was? Did she maybe let out a whoop of joyous excitement and run next door to tell her family? I really hope so. I love Elizabeth Bennett almost as much as Darcy does and I was thrilled when Jennifer Ehle played her opposite Colin Firth because I already had a crush on her thanks to The Camomile Lawn.

Why quote it here; because I am going to paraphrase it in a way which may not go down in publishing history but works for me.

It is a truth never known to be disproved that a share with a rising Coppock line will head higher over time.

Imagine if that proposition is true! The implications for a foaming at the mouth spread better like me are incredible. It means that as long as the Coppock line is rising I can hold my positions. I only need to worry when Coppock starts to fall and then I need to watch closely for broken trend lines and dead crosses.

As far as I am concerned this proposition is now in beta test because as I find shares with the right explosive fundamentals (remember I am only interested in 3G, high quality growth shares) I am buying them, making those spread bets and my plan is to hang in there and add to my positions, as long as those Coppock lines keep climbing.

Take OGIG, where I have a position although the Coppock has not yet turned higher. It should do once this month’s numbers are in. Once it does turn higher, it would take a dramatic setback for the Coppock line not to climb strongly for the rest of the coming year. So I already know that it is most unlikely that I will be selling any OGIG shares in 2023. On the contrary I expect to be buying more.

This is the great thing about Coppock. It has a strong tendency to move in long slow swings which is just what you want as an investor.

This is good news for other ETFs like my super-leveraged favourites, QQQ3, SOXL, SPXL (three times the S&P 500) and TECL. I am expecting the Coppock lines for all these ETFs to turn higher early next year and then keep climbing for at least the whole of 2023. On current numbers the Coppock line for QQQ3 is due to top minus 700 in January and then start climbing in February. This is why I am building a position now and expecting to add to it next year.

Note also that once we have an established rising Coppock we should be able to play this game in reverse and start looking for the moment in 2024 or whenever when it might turn down and give us early warning of a turning point ahead. In this way I am hoping to turn the extreme volatility of QQ3 and the other leveraged ETFs to my advantage.

This is a promising chart (for QQQ3 above) but what colours my interpretation is my knowledge that next year the Coppock indicator is almost certainly going to be climbing. On my simple logic that I want to hold shares (and QQQ3 is a share) when their Coppock line is rising I know I am going to want to be holding these shares next year which makes it tempting to buy a few now while the price is depressed. In previous periods when the Coppock line has been rising it has been a good idea to hold the shares. My assumption is that is going to be true this time as well.

Strategy

Here is another exciting 3G share where the chart looks good and the Coppock line is turning higher from a negative position, ISRG, Intuitive Surgical, which has been a spectacular long term performer.

Latest figures were excellent as is nearly always the case with this wonderful business.

Our business fundamentals strengthened in Q3 with 20pc procedure growth in da Vinci procedures compared with Q3 of last year and solid performance in each of our global regions. Our capital placements reflected 13pc growth in our installed base to meet procedure demand accompanied by continued increases in utilization per system per year, healthy indicators for our customers and for us. Ion also experienced increases in installs, procedures performed, and annualized system utilization.

In Q3, growth in procedures, the installed base of da Vinci systems, and average system utilization was healthy. The strength of these key business drivers resulted in a pro forma operating margin of 36pc and pro forma EPS of $1.19. Simultaneously, we saw headwinds from the strong U.S. dollar, lingering supply chain issues, and inflation, which together negatively impacted pro forma operating margin by approximately two percentage points compared to the third quarter of last year.

Q3 2022, 18 October 2022

The cash position is strong enabling the group to return cash to shareholders.

We ended the quarter with cash and investments of $7.4bn compared with $8.2bn at the end of Q2. The sequential reduction in cash and investments reflected share repurchases and capital expenditures, partially offset by cash from operating activities. During the quarter, we completed a $1bn ASR in addition to the $607m of shares repurchased in the first half. Since the end of 2021, our diluted share count has decreased by approximately 7m shares or 2pc, and we have a remaining authorization to repurchase our shares of $2.5bn.

Q3 2022, 18 October 2022

I guess I need to buy some of these too.

I remember years ago describing a stock marketing as simmering. Maybe that is where we are just now. And these opportunities don’t come along that often. The last time ISRG gave an unequivocal Coppock buy signal on this quarterly chart was in January 2016. It then rose for three years and the shares carried on climbing for a good while after that.

Of course I never forget another famous line from literature.

‘The plans of mice and men gang aft agley’.

We have Scottish poet Robbie Burns to thank for that one. My father, typical of many Scots who spent their entire lives in England, was always quoting stuff like that at his totally anglicised sons. We literally were bairns who occasionally went to the kirk and were supposed to hate the Sassennachs who ruled poor downtrodden Scotland from an uncaring Westminster.

Even so, with that proviso, I am very hopeful that we are putting together a strategy that is going to deliver exciting profits so don’t be too cautious. Nothing will happen if you don’t have a go.