CCI (Commodity Channel Index)

#momentum #oscillator

Creator: Donald Lambert

Measures how far price has moved away from its own average. Most values stay between +100 and -100; readings outside this zone show unusual strength or weakness.

• Default Period: 20
• Average Period: 5

In the Commodity Channel Index indicator, two lines are plotted below the chart.

1. Green line represents the Commodity Channel Index
2. Red line represents the Average of CCI

The Commodity Channel Index (CCI) is a momentum-based oscillator used to help determine whether a stock is in a bullish or bearish trend.

When the CCI is greater than zero, it indicates that the price is above the historical average. In contrast, if the CCI is below zero, the price is below the historical average.

In the case of the CCI moving and crossing +100 from below, it signifies bullishness, and in the case of the CCI moving and crossing -100 from above, it signifies bearishness.

CCI above zero shows price is above its average, bullish side.

CCI below zero shows price is below its average, bearish side.

Useful readings:

CCI above +100: Strong upmove in progress

CCI below -100: Strong downmove in progress

CCI returns from above +100 to below it: Upmove cooling off

CCI returns from below -100 to above it: Downmove cooling off

CCI between -100 and +100: Normal range, no unusual strength

Price makes new high but CCI does not: Bearish divergence, move losing power

Objective rules:

Bullish: CCI crosses above +100.

Bearish: CCI crosses below -100.

Long exit: CCI crosses back below +100

Short exit: CCI crosses back above -100

Zero-line trend rule: Stay with longs while CCI holds above zero, with shorts while below zero

What makes it unique:

Its open scale beyond +/-100 flags statistically unusual moves rather than fixed overbought levels. The same tool serves trend traders riding beyond +100 and faders playing the return from extremes.

Click here to learn more about the indicator.

The indicator table value in TradePoint & RZone also provides you with a list of all values of this indicator for any group of stocks. This will allow you to compare the readings of this indicator across different stocks.

This indicator is available in the System Builder on RZone & TradePoint for all charting methods. Using the system builder, you can develop various strategies based on the different conditions already present in this indicator. Additionally, it can be used with other indicators or price patterns to develop effective trading strategies. For any group of stocks and market segments, you can scan and backtest stocks based on those strategies.

The indicator is applicable to all types of charting. It is calculated based on the number of columns on P&F charts, bricks on Renko charts, lines on Line-break charts, candles on Heikin-Ashi charts, and lines on Kagi charts. While the formula and reading of the indicators remain the same, they become more dynamic on these charts.