CCI
is an oscillator that provides
an indication of overbought
or oversold markets.
Overview
- CCI
is usually used as an
overbought/oversold
indicator
-
CCI can also be used
for timing buy/sell
signals
The
Commodity Channel Index,
CCI, was designed to identify
the beginning and the end
of commodity market cycles
by Donald Lambert. It has
also proven effective for
other markets. CCI compares
the current mean price with
the average mean price over
a period of usually 20 days.
Interpretation
The CCI indicates
the price is increasingly
high compared to average
prices as it moves towards
+100. As the CCI drops towards
-100, it indicates that
the price is increasingly
low compared to average
prices.
Signals
-
CCI provides a warning
of overbought and
oversold markets
when the line crosses
the +100 or the -100
levels. The actual
buy or sell signal
is usually provided,
however, when the
line then crosses
back over the
+/-100 level.
-
Divergence from
the price is also a
good warning of a possible
correction or trend
reversal.
-
Zero-line crossings
can often provide a
confirmation buy/sell
signal or a complimentary
warning of a change
in trend.
