Commodity Channel Index (CCI)
The Commodity Channel Index is an oscillator that indicates when a security is overbought or oversold. Developed by Donald Lambert, the CCI is designed to identify cyclical turns in commodities and other securities. Along with the Average Directional Index, the CCI provides insight on how a market it trending.
The CCI uses the difference between the market price of a security and a moving average of that security to measure the strength of a trend.
Buy signals are generated when the +100 line is crossed and sell signals are generated when the -100 line is crossed.
If the market stays within + 100 and -100 the CCI is demonstrating the lack of a trend.
Chart courtesy of Prophet Financial Systems (www.prophet.net)