Commodity Channel Index (CCI)

The CCI was developed by Donald Lambert in 1980. It measures the momentum of the price with a line at the bottom of the chart.

The CCI measures the current price with respect to an average of the price during a period of time.

It fluctuates around the value zero. Then, when the price rises above its average, the CCI line increases, and viceversa when the price decreases below the average.

The CCI is mainly used through overbought and oversold crossovers and divergences.

Therefore, when the CCI goes into the oversold zone, it suggests that the price has deviated too much from its average, and it is likely to go back up, then signalling a buy. When the CCI crosses the overbought zone, the opposite happens and it generates a sell signal.