Unleashing The Power Of Coppock

Edwin Coppock invented his eponymous technical indicator in 1962, not in the 1930s as I used to think.

The indicator is designed for use on a monthly time scale. It is the sum of a 14-month rate of change and 11-month rate of change, smoothed by a 10-period weighted moving average. Coppock=WMA[10]of(ROC[14]+ROC[11]).

Coppock, the founder of Trendex Research in San Antonio, Texas, was an economist. He had been asked by the Episcopal Church to identify buying opportunities for long-term investors. He thought market downturns were like bereavements and required a period of mourning. He asked the church bishops how long that normally took for people, their answer was 11 to 14 months and so he used those periods in his calculation.^[2]

A buy signal is generated when the indicator is below zero and turns upwards from a trough. No sell signals are generated (that not being its design). The indicator is trend-following, and based on averages, so by its nature it doesn’t pick a market bottom, but rather shows when a rally has become established.

Coppock designed the indicator (originally called the “Trendex Model”^[1]) for the S&P 500 index, and it has been applied to similar stock indexes like the Dow Jones Industrial Average. It is not regarded as well-suited to commodity markets, since bottoms there are more rounded than the spike lows found in stocks.^[3]

Wikipedia

I believe this indicator has applications that its founder never dreamed of. He used it for the S&P 500 but with modern computers, we can calculate Coppock curves for anything that changes price monthly.

What it tells us is what is happening to momentum. A rising Coppock curve means an index, a stock or whatever is gaining momentum and vice versa for a falling Coppock.

Over the weekend I looked at many shares to see how their Coppock curves were performing. The picture is of an overall stock market that has been losing momentum for nearly a year. Losing momentum does not mean falling; it means exactly what it says and could be anything from rising more slowly to plummeting.

It is early days in my thinking but I suspect there is scope to base an entire trading system on Coppock.

First, we need to establish that a share is exciting – 3G in my terminology. After that, we need to keep an eye on the fundamentals to ensure it remains exciting. I am not talking about a deep dive into the balance sheet and the profit and loss statement, let alone the small print in the notes. Just read the shareholders letter, if there is one, or the latest quarterly report and it should be obvious.

Second, we need to see what Coppock is doing. Most likely it will either be rising or falling. If it is falling we could sell if our perspective is short-term or we are highly leveraged. Otherwise, we just wait for the next buy signal.

The key point to remember is that while Coppock is rising it is safe to hold the shares or buy them if we do not already own them.

We can sum up this strategy for a more risk-on type of investor (aka, batshit crazy gambler) like me as buy and hold while Coppock is rising and then either sell or be on the alert to sell, once Coppock starts falling.

Edwin Coppock would be spinning in his grave at this use of his indicator but I think it works. Applied across the whole stock market this means you buy and hold 3G shares with rising Coppock Curves and sell everything else. You will end up rotating out of shares with falling Coppocks into those with rising Coppocks and very possibly will make an astonishing amount of money.

Below are some recommendations for exciting 3G shares with rising Coppock Curves.

Share Recommendations

Palantir. PLTR

Root Inc. ROOT

GeneDX. WGS

Spotify. SPOT

Applovin. APP

Sezzle. SEZL

Fortinet. FTNT

Fortinet is a cyber security business. The business is doing well.

We are pleased with our strong performance in the fourth quarter, successfully balancing growth and profitability, including record operation margin of 39pc. Total revenue growth of 17pc, including product revenue growth of 18pc, our highest growth rate in six quarters as we further strengthen our market leadership in secure networking, a strong growth in Unified SASE and secure operation with security service edge building growth of 85pc, which drove our Unified SASE growth of 13pc, accounting for 23pc of our business. The strong Unified SASE growth highlights the value that our customers see in our single vendor SASE strategy.

We are the only vendor to organically develop the key SASE functionality into a single operating system for DOS, which integrates market-leading next-gen firewall, SD-WAN, ZTNA, Secure Web Gateway, CASB, DLP and other innovations seamlessly unified networking and security, delivering an enhanced user experience and securing access to applications across on-premise and cloud environment. This firewall SD-WAN, customer can deploy for SASE in the cloud or on-premise within minutes. We also enable sovereign SASE for service providers and large enterprise to host SASE within their own data centre, enabling heightened control of their data and grid connectivity while leveraging our FortiASIC technology to accelerate SASE function for superior performance. Additionally, Fortinet’s AI-powered security, unified management and single agent approach provide consistent protection across all locations and devices, ensuring full control, visibility, and simplified deployment while also offering industry’s simplest licensing and 3x to 5x better performance per user driven secure operation accounted for 11pc of total billing, while ARR [annual recurring revenue] grew 32pc.

Ken Zie, CEO, Fortinet, Q4 2024, 6 February 2025.

SASE (Secure Access Service Edge) in security is a cloud-delivered framework that combines software-defined wide area networking (SD-WAN) and Zero Trust security solutions, securely connecting users, devices, and networks to applications and resources. 

AI Overview

The second paragraph is for the more technologically inclined among you. It doesn’t mean much to me except to demonstrate that this is a technology business. It has a great chart and a rising Coppock.

The rising Coppock is important because you can buy and/ or hold knowing that you will get a sell signal, or be minded to sell when the Coppock Curve turns down.