CCI (Commodity Channel Index)
CCI measures current price relative to its average over a set period. It oscillates around zero, with readings above +100 indicating overbought and below -100 indicating oversold.
Understanding the Concept
Despite the name, CCI works on any asset—not just commodities. It's useful for spotting cyclical turns in price. When CCI rises above +100, the asset is in a strong uptrend (but potentially overbought). Below -100 means strong downtrend (potentially oversold). The best signals come from divergences: price making new highs while CCI makes lower highs suggests weakness. CCI also works well for identifying new trends—when it breaks above +100 after staying below zero, that often marks the start of a sustained rally.
Real-World Example
Bitcoin trades sideways for weeks with CCI hovering around zero. Suddenly, CCI spikes to +150 as price breaks resistance. This confirms a new trend is starting—time to go long.
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