Commodity Channel Index – Learn Why This Is Such A Popular Analysis Tool

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The Commodity Channel Index (CCI) is one of the more popular indicators that attempts to offer buy and sell signals; the CCI also is used to identify overbought and oversold areas of price action. The CCI is calculated so that roughly 75% of price movement should be between +100 (overbought) and -100 (oversold).

An example of how a trader might use the CCI for potential buy and sell signals is given below in the chart of the E-mini S&P 500 Futures contract:

commodity channel index or CCI potential buy and sell signals

Commodity Channel Index Potential Buy Signal

  1. Commodity Channel Index (CCI) is below oversold line (-100).
  2. CCI then crosses above the oversold line.

Commodity Channel Index Potential Sell Signal

  1. Commodity Channel Index (CCI) is above overbought line (+100).
  2. CCI then crosses below the overbought line.

The Commodity Channel Index (CCI) attempts to signal overbought and oversold conditions that might be used by a trader to buy and sell.

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