|  DEC 1995

The Commodity Channel Index Revisited by Jeanette Schwarz Young

Commodity Channel Index Revisited by Jeanette Schwarz Young Traders use technical tools in different ways at different times. Here, then, is one trader's idea on how to use this technical tool to identify major market trends. Technical tools continue to gain importance in the market trading environment today. Unfortunately, there seems to be no single indicator that can be used to give consistently correct signals. While many technicians prefer the relative strength index and others prefer stochastics or the moving average convergence/divergence (MACD), one of my favorites is the commodity channel index (CCI). I have found the CCI to be more reliable yet less well known than most of the tools available to traders today. THE BASICS The CCI was introduced by Donald Lambert in Commodities magazine in 1980. Lambert originally developed the tool to help the commodity trader spot cyclical turns in the commodity markets, but I have found that the CCI is a technical tool that can be used to identify the beginning and end of price trends, seasonal trends and cyclical trends. Although the CCI was developed for commodities trading, it works just as well for stocks, bonds and even indices. In fact, you can use it on anything that trades and even things that don't, such as sentiment indicators. It comes down to this: If enough data is available for statistical study, the CCI can be used.

by Jeanette Schwarz Young