InvestorQ : need to about CCI, and how to calculate it.?
Ravindra Yadav made post

need to about CCI, and how to calculate it.?

Nishita Gala answered.
1 year ago
The Commodity Channel Index (CCI) was originally applied to study commodity cycles but in the modern technical analysis, it is also used to study long term cycles in equities and bonds. If you thought that technicals are only about the short term, this serves to remind that technicals can be used for the long term too. The CCI was developed by Donald Lambert and it is actually a momentum-based oscillator which allows you to identify overbought and oversold zones. It is also used to evaluate the long term price trend direction and the underlying strength of the price formation.

The CCI gives a very reliable indication of whether the trader should take buy or sell positions and whether such positions should be aggressive or conservative. Here are a few key points you must know about the CCI. It measures the difference between the current price and the historical average price.

The formula for CCI is as under:
(High + low + close price / 3) – Moving Average / (0.015 X Mean Deviation)
When the CCI goes from negative or near-zero readings to +100 can be used as a signal to look for an emerging uptrend. The actual figures will vary from asset class to asset class.

On the other hand, if the CCI goes from positive or near-zero reading and then further lower to -100 it indicates an emerging downtrend. Once you are clear with the trend, you need to identify the overbought and oversold zones based on past data, you can use them as levels to buy and sell in the future. Typically, technical chart packages have these levels stored in and you can use them to trade. In the past, this CCI has been useful in calling long term trend shifts in equity, bonds, and specific commodities.