Commodity Channel Index (CCI) is a technical indicator, developed by Donald Lambert and featured in Commodities magazine in 1980. This is a versatile indicator that has the purpose to identify a new trend or warn of extreme conditions. CCI was at first developed to identify cyclical turns in commodities, but the indicator can successfully applied to indices, ETFs, stocks and other securities. Generally, CCI measures the current price level relative to an average price level over a particular period of time. The indicator is relatively high when prices are much higher of their average. CCI is relatively low when prices are far below their average. In this way, CCI can be used to identify overbought and oversold levels.
It is easily calculated by the following formula:
CCI= Price-MA / 0.015 x D