The Commodity Channel Index measures how far the current price has deviated from its statistical average over a lookback. Despite the name it works on any market, not just commodities. Unlike RSI or Stochastic, CCI is essentially unbounded — it usually oscillates between −100 and +100 but can spike well beyond in strong moves.
Reading it
- Above +100 — price is unusually far above its average; strong upside momentum (or overextension).
- Below −100 — unusually far below; strong downside momentum (or oversold).
- The ±100 crossings are the common signals: a cross above +100 can mark the start of a strong up-move, a cross back below it a loss of momentum.
Two ways to use it
CCI has a split personality. As a breakout/trend tool: a move above +100 signals strong momentum worth riding, not fading. As a mean-reversion tool: extreme readings (say beyond ±200) flag overextension likely to snap back. These are opposite trades — which one applies depends, again, on whether the market is trending or ranging.
Practical notes
Because CCI is unbounded, its extremes are relative — what counts as 'extreme' varies by asset and volatility, so it pays to observe an instrument's typical range rather than apply fixed levels blindly. CCI also shows divergence like the other oscillators. It is less popular than RSI but offers the same momentum information from a slightly different, deviation-based angle.