The Commodity Channel Index is a price momentum indicator equally applicable to
stocks. It seeks to identify price movements that are more significant than just
statistical fluctuations. Such price movements are supposed to offer trading opportunities.
Research with historical data will give you the optimal period for the chart, as
well as the significant values of the indicator. The developer, Donald R. Lambert,
suggested that values of the indicator above 100% or below -100% were significant.
However, Colby & Meyers (1988) suggest this interpretation may be too conservative.
The Commodity Channel Index is calculated by comparing the difference between the
average price and the average of a number of previous prices, divided by .015 of
the mean deviation of the daily average prices from the moving average.
Colby and Meyers (1988). The Encyclopaedia of Technical Market
Indicators. Dow Jones-Irwin.