Commodity Channel Index - CCI

The Commodity Channel Index (CCI) is an oscillator that can be used to identify a new trend or warn of extreme conditions. CCI is high when prices are much above their average. CCI is relatively low when prices much far below their average. In this manner, CCI can be used to identify overbought and oversold levels.Today's traders often use the indicator to determine cyclical trends in not only commodities, but also equities and currencies.

For instance, a security would be considered oversold when the CCI dips below -100 and overbought when it exceeds +100.

From oversold levels, a buy signal might be given when the CCI moves back above -100.

From overbought levels, a sell signal might be given when the CCI moved back below +100.