Weekend Market School

Today's Lesson: CCI (Commodity Channel Index)

1. What is it?

CCI is a momentum indicator that shows how quickly prices are moving within a "channel". Think about how much prices are "running" in the middle of a trend? CCI measures this running speed. Its official definition is: An oscillator that measures how much prices deviate from the statistical average (average price) over a certain period. It is usually calculated over a 20-day period.

2. Why is it important?

CCI tells you how far a stock has moved from its "normal" price levels. It provides two major advantages to the investor:
1. Catches the Moments When Price is Overbought/Oversold: When the price rises too much (overbought) or falls too much (oversold), you get a potential reversal signal.
2. Detects Strong Trends: The faster and further the price moves within the channel, the stronger the trend. This shows you the probability that the trend will continue.

3. How to Read / Use?

The reading of CCI is quite simple. We only focus on two critical lines:+100 and-100.

• + 100 Region (Overbought Limit): When the price exceeds the CCI index of +100, the stock has become "too expensive" compared to its average price. This may mean that selling pressure could come in momentarily, but in a strong uptrend, it is normal to continuously stay above this level.

• - 100 Region (Oversold Limit): When the price falls below the CCI index of -100, the stock has become "too cheap". This can be an area for those looking for buying opportunities. However, in a strong downtrend, it is also normal to fall below this level.

Usage Logic:

• Overbought (above +100): It indicates that the trend is near its peak and caution is needed.

• Overbought (above 100): It indicates that the price is near the peak of the trend, suggesting a potential correction or reversal.

• + Between 100 / -100: It shows that prices are moving within a "normal" channel, indicating uncertainty.

4. Real Example

[ Let's look at the CURRENT DATA:

• SASA (Sasa Sugar): According to CURRENT DATA, SASA's daily return is -4.13% and CCI value is 0.14. This shows that the CCI index is between -100 and +100, i.e., within the "normal" channel. The stock's decline that day did not create a deviation from its statistical average, and prices moved within the expected range.

• GUBRF (Tupras): According to CURRENT DATA, GUBRF's daily return is +3.32% and CCI value is 0.48. Like SASA, GUBRF is also in the central region of the CCI index. This indicates that prices are moving both close to their historical average and without entering the overbought/oversold zone, showing balanced movement.

• DSTKF (Dogus Otomotiv): According to CURRENT DATA, DSTKF's daily return is -9.98% and CCI value is -0.54. DSTKF, like others, is in the central area of the CCI index. However, it experienced a sharp 9.98% daily drop. This shows that CCI alone does not provide a "buy-sell" signal, but only measures how far the price has deviated from the average. Despite the sharp drop, CCI has not fallen below -100, meaning it has not given a technical "oversold" signal.

5. Common Mistakes

1. Making Decisions Alone: Using CCI alone as a buy-sell signal is the biggest mistake. It must definitely be used together with price charts, trading volume, and other indicators.
2. Ignoring the Trend: A stock in a strong uptrend can continuously stay above +100. This is not a "sell" signal but shows the strength of the trend. It might be more appropriate to wait for CCI to fall back to -100 before reversing the trend.
3. Getting Stuck on Numbers: + Small differences like 101 or -99 do not change the signal. It is necessary to focus on the general trend of the indicator and its alignment with price movements.

6. Mini Test

1. What does it mean when the CCI index falls below the -100 level for a stock?
   Answer: It means the stock has entered the oversold zone, indicating that its price has fallen significantly compared to the recent average level.

2. A stock in a strong uptrend is trading at a CCI level of +150. What does this mean?
   Answer: It indicates that the stock is in an overbought zone. However, in a strong trend, this is normal and can also be interpreted as a signal that the trend may continue.

7. Summary

• CCI measures how quickly and far prices have deviated from their average levels.

• + The 100 and -100 levels indicate overbought and oversold zones.

• The indicator is used to understand the strength of the trend and potential reversals.

• It should definitely not be used alone but should be supported by other analysis methods.

• CCI is not a "crystal ball" but an assistant that tells you what the "market feels".

This lesson is for educational purposes, not investment advice.