What is the current Geico share price

GEICO CORP. 2023 chart

Explanation of the Commodity Channel Index (CCI) indicator


The Commodity Channel Index comes from the commodity trader Donald Lambert, who originally developed it to identify the beginning and the end of cycles in the commodities market. The CCI generates a value that is intended to express how far the typical daily rate deviates from a moving average.

Three values ​​are included in the calculation of the index, which must first be calculated. The first is what is known as the typical or significant rate. It is obtained by adding the daily high, the daily low and the closing price and dividing it by three. A simple moving average is formed from this price. Finally, both values ​​are used to calculate how much the typical price deviates on average from its moving average.

The index is then calculated using the following formula:
CCI = (typical price - moving average) / 0.015 x average deviation from the moving average).

The difference between the typical price and the moving average is therefore related to the average deviation. The factor 0.015 ensures that the CCI is within a scale of -100 to 100 percent in a large number of cases. These two marks are interpreted as border lines.

It may be particularly exciting for observers when these lines are exceeded or undercut. If one assumes that a large part of the price fluctuations around the mean value is of a random nature, then exceeding the 100 percent line and falling below the -100 percent line could each be viewed as a signal for the beginning of a trend. More recent interpretations, however, see the lines more as brands at which trend changes can take place, because the CCI often quickly returns to the neutral area after extreme values. Some analysts, in turn, pay particular attention to divergences between the course of the course and the course of the CCI, especially in the extreme range, and interpret these as warning signals. With this index, too, there is enormous scope for individual interpretation.