Business, Legal & Accounting Glossary
The Commodity Channel Index (CCI), first introduced by Donald Lambert, is an oscillator used to help determine when a stock has been overbought and oversold. The Commodity Channel Index usually trends between +/-100.
The CCI measures the variances in the price of a given equity compared to the average price of the same equity.
A divergence occurs when the stock price reaches a new high but the Commodity Channel Index does not (reach a new high). The CCI is considered to be in an overbought state when it is above 100 and an oversold state when it is below -100. Buy signals can, therefore, be issued when the CCI rises above the -100 line and sell signals when the CCI drops below the +100 line.
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This glossary post was last updated: 25th March, 2020 | 0 Views.