The Commodity Channel Index (CCI) is an oscillator which measures the current price of an asset in relation to its average price over a given period of time (typically 20 days). It is calculated using the following formula:
CCI = [Typical Price - Moving Average of Typical Price] / (0.015 * Mean Deviation)
where Typical Price = (High + Low + Close) / 3
and Mean Absolute Deviation = Summation of the Absolute Value of the Typical Price and its N-period Moving Average / N
The CCI value can range from -100% to 100%. It can be used to generate buy and sell signals. Some traders buy a stock when the price crosses above 100% and sell the same stock when it falls below 100%. Alternatively, some traders go short when a stock crosses below -100% and maintain that short position until the stock rises above -100%.
Parameters
Overbought - The threshold whereby a stock becomes overbought.
Oversold - The threshold whereby a stock becomes oversold.