CCI Bounce

CCI measures how far the current price has deviated from its average price over a period. CCI = 0 means price equals average. CCI > +100 means price is significantly above average (overbought). CCI < -100 means price is significantly below average (oversold).

Donald Lambert originally developed CCI for commodity trading in 1980. However, the indicator works equally well on stocks, ETFs, forex, and any other tradable instrument. The name just reflects its origins.

The standard is CCI(20) as Lambert originally specified. For shorter-term trading, try CCI(14) or CCI(10). For position trading, try CCI(50). Start with 20 and adjust based on your results.

Yes! CCI is unbounded - it can theoretically go to any extreme. Values like -200, -300, +200, +300 are possible in strong moves. This is different from RSI which is bounded 0-100.

The primary target is the zero line (CCI = 0), which represents the average price. This captures the mean reversion move. Some traders target +100 for larger gains, but zero is more reliable.

Divergence is when price and CCI move in opposite directions. Bullish divergence: price makes lower low, CCI makes higher low (reversal up likely). Bearish divergence: price makes higher high, CCI makes lower high (reversal down likely).

Use a 50 or 200 MA. Only take CCI oversold buys when price is above MA (uptrend). Only take CCI overbought sells when price is below MA (downtrend). Or use ADX: trade CCI bounces only when ADX < 25.

The zero line means price equals the average (typical price = SMA of typical price). It acts as dynamic support/resistance for CCI. For bounce trades, zero is the primary target. Zero line crosses also signal momentum shifts.

Lambert chose 0.015 to ensure 70-80% of CCI values fall between -100 and +100. This means values beyond ±100 are statistically significant deviations from normal - true overbought/oversold conditions.

For mean reversion: Exit when CCI reaches zero line. For extended moves: Exit when CCI reaches +100 or trail with stops. Hybrid: Exit 1/3 at zero, 1/3 at +50, trail rest to +100.

Dual CCI uses two periods: long CCI (e.g., 20) for trend direction and short CCI (e.g., 6) for timing. Buy when long CCI > 0 (uptrend) and short CCI crosses above -100 (entry). Provides trend confirmation plus precise timing.

In bull markets, CCI operates -50 to +200 with support at -50 to 0. In bear markets, CCI operates -200 to +50 with resistance at 0 to +50. Adjust your oversold/overbought levels based on the major trend.

CCI Histogram = Current CCI - Previous CCI. Positive = CCI accelerating up. Negative = CCI accelerating down. It provides early warning of CCI turns before the main CCI line reverses.

Woodie CCI is a trading system by Ken Wood using CCI(14) + CCI(6). Patterns include zero-line reject (CCI bounces off zero in trend), trend line break, and hook from extreme. Popular among CCI traders.

Buy calls when CCI crosses above -100 (30-45 DTE, ATM). Sell bull put spreads at oversold CCI bounces. Extreme CCI often coincides with high IV - good for premium selling strategies.