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Commodity Channel Index (CCI)

The Commodity Channel Index (CCI) is a technical analysis indicator that measures the deviation of a security’s price from its average price over a specified period. CCI helps traders identify overbought and oversold conditions in the market, indicating potential price reversals. When the CCI value is high (typically above +100), it signals that the asset may be overbought, while a low CCI value (below -100) suggests the asset may be oversold.

Example

A trader might use the CCI to identify when a stock’s price is overbought, signaling that it may be time to sell or take profits, especially if the CCI value rises above +100.

Key points

• The Commodity Channel Index (CCI) is a technical indicator used to identify overbought and oversold conditions.

• CCI values above +100 suggest overbought conditions, while values below -100 indicate oversold conditions.

• Originally developed for commodities, CCI is now used for various asset classes.

Quick Answers to Curious Questions

CCI measures how far a security’s price has deviated from its average price over a given period, helping to identify overbought or oversold conditions.

A CCI above +100 suggests that the asset may be overbought and due for a price correction, while a CCI below -100 signals that the asset may be oversold and potentially undervalued.

Yes, the CCI is widely used for stocks, currencies, and other financial instruments in addition to commodities.