CCI Bounce

Donald Lambert developed it in 1980 for commodity trading, hence the name. However, it works equally well on stocks, indices, forex, and any tradeable instrument. The name is historical - don't let it limit your application.

Start with the standard 20-period CCI. It's well-balanced for most swing trading. As you gain experience, test 14-period (faster, more signals) or 50-period (slower, fewer but more reliable signals).

No! CCI below -100 is necessary but not sufficient. Wait for the 'hook' - CCI turning back up toward zero. Also check for price confirmation and trend context. Buying just because it's oversold leads to catching falling knives.

CCI is unbounded - it can go to -200, -300, or beyond in extreme moves. RSI is bounded 0-100. CCI measures deviation from mean; RSI measures momentum. Both identify extremes, but CCI shows HOW extreme via its unbounded scale.

The primary target is CCI reaching zero (the mean). This represents complete mean reversion. Conservative exits at zero have higher win rates. Aggressive traders target the opposite extreme (+100 for longs) but with lower probability.

Compare price swings to CCI swings. Bullish divergence: price makes lower low, but CCI makes higher low (less negative). Bearish divergence: price makes higher high, but CCI makes lower high. Trade on hook after divergence forms.

Adjust for period and volatility. Shorter periods (10-14): use -150/+150 or -200/+200 since they reach extremes more often. High volatility markets: wider thresholds. Low volatility: tighter thresholds (-75/+75). Test on your instruments.

Taking CCI bounces in the trend direction (oversold in uptrend, overbought in downtrend) significantly improves win rate. You're buying pullbacks, not fighting trends. Simple filter: only buy oversold CCI above 50-day MA.

Yes, especially in strong trends. In downtrends, CCI can stay below -100 for weeks. This is why the hook confirmation and trend filter are important - they help avoid buying in persistent downtrends.

Higher timeframe (weekly) provides direction - CCI above zero is bullish. Lower timeframe (daily) provides entry signal - extreme CCI with hook. Best setup: weekly bullish (CCI > 0) + daily oversold (CCI < -100) with hook = buy pullback in uptrend.

Using fast CCI (10-14) and slow CCI (50) together provides confirmation. Best signal: Both oversold, fast CCI shows hook while slow CCI also below -100. This combines timing (fast) with confirmation (slow) in one chart.

At high IV (common at extremes): Use credit spreads (bull put for oversold) to benefit from IV crush. At low IV: Buy calls/puts or use debit spreads. CCI provides direction; IV determines structure. Always check IV rank first.

Test parameter ranges (period 10-50, thresholds -75 to -200). Use walk-forward validation. Look for robust zones where neighboring parameters perform similarly. Separate testing by regime (trending vs ranging). Accept slight suboptimality for robustness.

Limit positions per sector (max 2-3). When scan shows multiple oversold stocks in same sector, choose highest-ranked only. Track average portfolio CCI to monitor net exposure. Correlated positions bounce (or fail) together.

In strong trends, price persistently deviates from mean - that's what trending means. CCI can stay extreme as price trends further from average. The mean itself is moving with the trend. CCI bounces excel in ranging, mean-reverting markets.