Commodity Channel Index, CCI - CCI Technical Analysis & Commodity Channel Index Signals
Developed & Created by Donald Lambert
The CCI tracks how a commodity price shifts from its average value.
This instrument functions as an oscillator, fluctuating between predetermined upper and lower boundary values.
A high CCI indicates that the price is significantly above the average when compared and analyzed.
A low CCI indicates that the price is significantly below the average.
Technical Analysis and How to Generate Signals
Over-bought/ Oversold Levels
The CCI commonly oscillates between ±100.
Indicator values exceeding +100 suggest overbought conditions and a potential market correction is approaching.
Indicator values below -100 indicate an over-sold conditions and an impending market correction
Buy Signal
When CCI drops below -100, it signals an oversold state. A market bounce may follow.
Oversold regions will persist until the CCI trading indicator rises above -100.
When price begins moving above -100 then that's interpreted as buy.
The Commodity Channel buy signal should be combined with a trend line break signal to confirm the buy.
Buy Trade
Sell Trade Signal
If the CCI is over-bought, zones above +100, then there's a pending market correction.
Over bought levels will remain intact until CCI indicator starts to move below +100.
When price begins and starts moving below +100 then that's a interpreted as sell.
This Commodity Channel sell signal ought to be corroborated by a trendline break signal to confirm the validity of initiating a sell order.
Sell Trade
Divergence Trading
Bullish Trade Divergence Trading Setup
Bullish divergence forms when price is forming new lows while the CCI is failing to surpass and move past its previous low.
This constitutes a bullish indication because this divergence often precedes a market upward correction.
Bearish Divergence Trade Setup
Bearish divergence happens when prices keep hitting new highs, but the Commodities Channel Index just can't break past its last high.
This constitutes a bearish indication, as the detected divergence typically precedes a market downturn correction.
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