Elaborated by Donal Lambers in the 80s, the Commodity Channel Index (CCI) is a technical indicator of the oscillator family indicating overbought and oversold zones, as well as divergences of the asset. It approximates the stochastic.
This indicator is usually represented with values going from -500 to 500.
To remember important information, two lines are drawn at -100 and 100.
• A CCI higher than 100 indicates an overbought zone.
• A CCI lower than -100 indicates an oversold zone.
• A CCI who doesn’t manage to reach its old highs/lows while the price manages to do so, indicates the presence of bullish/bearish divergences.
It is very difficult to make a decision only regarding this indicator, very subjective and sometimes giving false signals.