Commodity Channel Index (CCI) Technical Analysis & CCI Signals

Developed by Donald Lambert

The Commodity Channel Index measures the variation of a commodity price from its statistical mean/statistical average.

This indicator is an oscillator which oscillates between high levels & low levels

When the CCI is high it portrays that price is unusually high compared to the its average.

When the CCI is low it portrays that price is unusually low compared to the its average.

Technical Analysis & How to Generate Signals

Overbought/ Oversold Levels

The CCI typically oscillates between ±100.

Indicator values above +100 indicate an overbought conditions and an impending market correction.

Indicator values below -100 indicate an oversold conditions and an impending market correction

Buy Signal

If the Commodity Channel Index indicator is oversold, levels below -100, then there's a pending market correction.

The oversold areas will remain intact until Commodity Channel Index indicator starts to move above -100.

When price starts moving above -100 then that is interpreted as a 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 Commodity Channel Index is overbought, zones above +100, then there is a pending market correction.

Over bought levels will remain intact until CCI indicator starts to move below +100.

When price starts moving below +100 then that is a interpreted as sell.

This Commodity Channel sell signal should be combined with a trend line break signal to confirm the sell.

Sell Trade

Divergence Trading

Bullish Trade Divergence

Bullish divergence forms when price is making new lows while the CCI indicator is failing to surpass its previous low.

This is a bullish signal because the divergence will be followed by an upwards market correction.

Bearish Trade Divergence Setup

Bearish Divergence occurs when price is making new highs while the Commodities Channel Index indicator is failing to surpass its previous high.

This is a bearish signal because the divergence will be followed by a downward market correction.

Technical Analysis in FX Trading