The Commodity Channel Index (CCI), developed by Donald Lambert in 1980, is a versatile momentum oscillator that measures the deviation of a security's typical price from its statistical mean over a specified period — typically 20 days. It is calculated as: CCI = (Typical Price – SMA of Typical Price) ÷ (0.015 × Mean Deviation), where the Typical Price is the average of the high, low, and close for each period. CCI oscillates between positive and negative values with no fixed boundaries — readings above +100 indicate that the price is significantly above its average (overbought or strong momentum), while readings below -100 indicate the price is significantly below its average (oversold or strong bearish momentum). Despite its name, CCI is widely applied to equity markets and indices. In Indian equity markets, CCI is used in two ways: as an overbought-oversold indicator (contrarian use, looking for reversals when extreme readings are reached) and as a trend-following tool (momentum use, entering longs when CCI crosses above +100 and shorts when it crosses below -100 — indicating strong directional momentum in Nifty 50, Bank Nifty, and sectoral stocks).
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