What is Commodity
Channel Index (CCI) Indicator and how to use for stock screening
Commodity Channel Index (CCI) indicator
is an oscillator introduced by Donald Lambert in 1980. CCI indicator was
designed to identify cyclical turns in commodities. CCI index can also be
used to trade securities. The CCI indicator measures the security's price
relative to the current moving average. High values of the CCI indicate an
unusually high price compared to the average whereas low CCI values indicate
unusually low price.
Formula :
The equation for calculating the
commodity channel index (CCI) is as follows:
CCI = ( Typical Price - SMATP ) / (
.015 x Mean Deviation )
Typical Price = average of the high,
low and close prices of the most recent period
SMATP = simple moving average of the
typical prices of previous n periods
How does it work?
The CCI measures the variation of a
security's price from its statistical mean. High values of CCI usually indicate
that prices are unusually high compared to average prices. While low values
indicate that prices are unusually low. The CCI usually oscillates between
100 and -100. If the CCI exceeds 100 the price is considered overbought,
conversely if the CCI drops below -100 the price is considered oversold.
Therefore once the CCI returns below the overbought level (100) a sell signal
may be given, and when the CCI returns above the oversold level (-100) a buy
signal may result.
Trading Signals
Try the following stock screening
( a.k.a stock filtering) criteria to filter the stocks listed on ASX
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