CCI – The Commodity Channel Index is used for two main purposes: to identify a new trend and to get extreme situations. It correletes the price of a good, comparing to N periods. As other oscillators is divided into three areas, two of which are now known over-zones, but this time are delimited by +100 for the over-bought and -100 for the over- sold.
- Buy:when the CCI line exceeds +100
- Sell:when the CCI line exceeds -100
It is recommended not to be confused with the technique adopted using the RSI for example, that on the contrary, provides for investment in reverse trend once touched the over-zones.
Another technique that many traders use by CCI is to climb over the 0. It corresponds exactly to the midpoint between +100 and -100 and this strategy suggests us to invest on Long (Buy) when the CCI exceeds 0 from the bottom, or to invest on Short (Sell) when the CCI intersects the 0 point from the top.
Also consider that, as its name suggests, this oscillator is mostly used with Commodities (Ex. US Oil).