CCI

CCI, the commodity channel index, is an oscillator that measures how far a stock's current price has strayed from its recent statistical average, expressed as a single number that swings above and below zero. Despite its name, which comes from its original use analyzing commodity price cycles, it is now applied broadly across stocks, indexes, and other assets.

The formula is:

where typical price is the average of the high, low, and close for the period. The constant in the denominator is scaled so that under normal conditions most readings fall between negative 100 and positive 100, with readings above 100 signaling the price has moved unusually far above its recent average, and readings below negative 100 signaling it has moved unusually far below it.

Traders use CCI in two main ways. As a mean reversion tool, extreme readings beyond the 100 and negative 100 thresholds are treated as overbought or oversold conditions where a pullback toward the average becomes more likely. As a trend tool, some traders instead treat a break above 100 as confirmation that a new uptrend is gaining strength rather than as a signal to sell, since a stock can push into extreme CCI territory and stay there through a strong sustained move. Like most oscillators, it works best combined with price action and other indicators rather than traded on its own.