When it comes to CCI, the following events are recognised.
- When the CCI reaches the +100% line and goes above, this is considered a bullish event
- When the CCI reaches the -100% line and dips below, this is considered a bearish event
- When the CCI falls below the +100% line, this indicates that the bullish trend is over
- When the CCI rises above the -100% line, this indicates that the bearish trend is over
This oscillator is actually used for equities and all the related analysis; often, many are confused by the use of ‘commodity’ in the title. In simple terms, the CCI is a combination of the moving average and the price and this will then be presented as a percentage that moves between the high of 100 and the low of -100. As we saw previously, these two barriers can be exceeded and it results in a bullish or bearish trend.
How does the CCI move? Normally, a movement in CCI will be seen as the price and the moving average fluctuates. For example, a price drop below the moving average will take the CCI closer or even below the -100% mark. Alternately, CCI will grow closer to the 100% mark if the price rises above the moving average. When making trades, there are certain exceptions that have to be noted when assessing this index.