Commodity Channel Index (CCI): Indicator Guide
The Commodity Channel Index, or CCI, measures how far a price has drifted from its recent average. Readings above +100 mean unusually strong and readings below −100 mean unusually weak. There is no upper or lower limit, and the number describes the recent past rather than what comes next.
What It Shows
CCI compares today's typical price with its average over the last 20 days and counts the gap in units of normal variation. A reading of zero means price sits right at its recent average. Large positive numbers mean it has run well above that average, and large negative numbers mean it has fallen well below.
The name comes from the index's origin in commodity markets, but it is used on stocks too, and it does not measure commodities. Think of it as a thermometer with no top mark.
How It's Calculated
Start with the typical price for each day: the high, low and close added together and divided by 3. Then average the typical price over the last 20 days. Next, measure the average distance the typical prices sit from that average.
CCI is today's typical price minus its average, divided by 0.015 times that average distance. The 0.015 is a scaling constant, chosen so that most readings land between −100 and +100.
A worked example, with made-up numbers: the typical price is $52, its 20-day average is $50 and the average distance is $1.00. CCI = (52 − 50) ÷ (0.015 × 1.00), which is about 133. That is above +100, so it counts as unusually strong.
How to Read It
Look for these three things on the line. Each describes how stretched price is, and none is a prediction.
- The two lines. Above +100 is the zone traders call a strong uptrend, and below −100 the zone they call a strong downtrend. The farther past those lines, the more stretched the move: +200 is a stronger reading than +100.
- The way back. A move back from an extreme toward zero shows momentum cooling. It does not mean the trend has reversed.
- The stock's own history. Because the scale is open-ended, judge a reading against that stock's own past. A +150 that is routine for one stock can be rare for another.
Where It Misleads
CCI has no fixed ceiling, so "extreme" depends on the stock and the period.
Short periods make the line jumpy and produce many crossings of ±100. A strong trend can keep CCI above +100 session after session, so a high reading alone does not mean the move is finished.
Settings in Rapunzl
| Setting | Default | Range |
|---|---|---|
| Period | 20 | 2 to 400 |
Period sets how many days feed the average and the deviation. A shorter period reacts faster and crosses ±100 more often. A longer period is smoother and crosses less. Rapunzl counts candles, not calendar days, so with 5-minute candles a period of 20 reaches back 20 of them.
Try It in Rapunzl
Open a stock's chart and choose Candlestick or OHLC first, since CCI needs each day's high, low and close. Then open Customize Chart → Chart Indicators → Advanced Indicators and add Commodity Channel Index. It draws in its own panel with guide lines at +100 and −100. Begin at 20, then try a shorter period and watch how many more crossings appear. On a chart, the Commodity Channel Index is an Advanced study and part of Rapunzl Premium.
In Rapunzl's Stock Scanner, "CCI 20" is a field in the Momentum group: above 100 is unusually strong and below −100 unusually weak. The field is free. Add it as a filter to any idea, or sort a list by it, then open a result's chart and add Commodity Channel Index to see the same reading in the panel.
A 15-Minute Class Activity
Quiet Corp. and Busy Corp. Students work in pairs with a calculator and scrap paper. Every price and distance below is made up.
- 3 minutes. Draw a vertical line on the board and mark +100, zero and −100. Ask what each stretch of the line would mean for a stock.
- 5 minutes. Mini case: Quiet Corp. has a typical price of $52, a 20-day average of $50 and an average distance of $1.00. Pairs work out CCI (about 133) and say which zone it falls in.
- 4 minutes. Busy Corp. has the same $2 gap but a larger average distance of $2.00, because it normally swings more. CCI is about 67, inside the normal zone. Ask why the same gap now reads weaker.
- 3 minutes. Exit ticket: in one sentence, explain why a CCI above +100 is not a prediction.
Related Indicators
- Williams %R: another momentum study, a 0 to −100 gauge of where the close sits in its recent range.
- RSI: a momentum study boxed in between 0 and 100, where CCI is open-ended.
- Rate of Change: momentum as a plain percent move over a set number of days.
- Stochastic Oscillator: a range-based gauge that reads where the close landed.
Frequently Asked
Questions
It measures how far today's typical price has moved from its recent average, in units of normal variation. Zero means right at the average.
Above +100 is called unusually strong and below −100 unusually weak. The labels describe how stretched the price is, not what happens next.
No. The scale is open-ended, so a reading of +200 or −200 is possible and means a more stretched move than +100 or −100.
No. The name comes from where the index began, but it is used on stocks too.
The chart study is. The "CCI 20" field in Rapunzl's Stock Scanner is free.
Teach Momentum With Rapunzl
Momentum is easier to teach when students can watch it move. Request a demo to explore Rapunzl in your classroom, and send families to the parents page if a student wants to keep going at home.
Indicators, patterns and examples in this article are for education and are not investment advice or a recommendation to buy or sell any security.
By Myles Gage, CEO & Co-Founder at Rapunzl.