The Commodity Channel index (or CCI) was developed by Donald R. Lambert.
The CCI index is somewhat akin to the “standard score” in statistics. It measures the distance from an instrument mean value to its current price, to spot if the current price is unusually high (high CCI value) or unusually low (Low CCI value) compared to its average price level.
The CCI indicator oscillates around a zero line, and typically oscillates between the values +/- 100. Some analysts will see values above 100 as indication of an “overbought” condition, and values below -100 as indications of “oversold”. In both instances, they would expect a divergence followed by a price correction. Other analysts look for bull corrections by spotting instances where the CCI advances while the price declines, or upcoming bear corrections where CCI drops while prices still continue upwards for a while. If this happens when CCI is at extreme levels, it is considered by some to be an even more significant confirmation of upcoming price reversals. Many analysts prefer to use this indicator in sideways markets.