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Mikula Forecasting
Company: Strategy #16:
CCI Collapse
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Written by: Patrick Mikula CTA
Copyright (c)2003-06 by Patrick Mikula All Rights Reserved.
(Please to not copy or foreword this article).
Mikula Forecasting Company
P.O. Box 152672
Austin, TX 78715-2672
USA
www.MikulaForecasting.com
support@MikulaForecasting.com
====================
This strategy will discuss a specific setup for using
the Commodity Channel Index CCI. This set up is used to find
market declines. The CCI is an index which oscillates around
zero. The traditional upper boundary which marks when a
market is reaching a swing top is 100. This means when the
CCI moves above 100 an upward market swing is seen as being
overbought. The setup for this strategy occurs when the CCI
moves above 100 and then falls back to the zero line before
the market starts to decline. The CCI reaching 100 then
falling to zero indicates weakness in the market and shows
the market is ready to decline. The chart below shows the
stock for Alcoa symbol AA. Notice the CCI moved above the
100 line at line A and fell back to the zero line at B.
Between lines A and B the stock did not yet start its
decline. This setup showed this market was ready to fall and
after B the stock did fall.
The chart below shows the interest rate March 2005
Eurodollar symbol ED05H. On this chart we see another CCI
setup which helps locate the start of a decline. The CCI
moved above the 100 level at line A and then fell back to
zero at B. Between A and B the market held sideways and did
not decline. This shows that the market is getting ready to
break from the sideways movement downward. After B the
market did start a decline.
MORE:
To see more examples of this strategy read the
version of this article on the MarketWarrior
owners page.
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Mikula Forecasting Company