StockSignal
CCI 20 measures how far price has moved away from its 20-period average. High positive or negative values can signal overbought or oversold levels.
CCI 20 measures how far price has moved away from its 20-period average. High positive or negative values can signal overbought or oversold levels.
The calculation:
Typical Price = (High + Low + Close) / 3 Mean Deviation = Average of |Typical Price - SMA of Typical Price| CCI = (Typical Price - SMA of Typical Price) / (0.015 × Mean Deviation)
Interpreting CCI values:
- CCI > +100: Overbought; price significantly above average
- CCI < -100: Oversold; price significantly below average
- CCI near 0: Price near its average; neutral momentum
- Extreme values (±200+): Very strong momentum; potential exhaustion
Trading applications:
- Trend identification: Sustained readings above +100 indicate uptrend
- Reversal signals: CCI crossing back below +100 or above -100 can signal reversals
- Divergences: Price/CCI divergences warn of potential trend changes
- Zero line crossovers: Crossing above/below zero indicates momentum shift
Why the 0.015 constant:
- Scaling factor: Ensures about 70-80% of values fall between +100 and -100
- Standardisation: Makes readings comparable across different securities
Best practices:
- Combine with trend: Use CCI for timing within established trends
- Multiple timeframes: Confirm signals across different periods
- Avoid ranging markets: CCI works best in trending conditions
Originally developed for commodities, CCI is now widely used across all asset classes to identify cyclical trends and potential reversal points.