How to use Commodity Channel Index for trading

 The Commodity Channel Index (CCI) is a popular technical analysis indicator used by traders to identify overbought and oversold levels of an asset. The CCI measures the difference between an asset's current price and its average price over a given period. Traders use the CCI to identify potential trend reversals and trade signals.

Here are some ways you can use the CCI indicator for trading:

1. Identifying overbought and oversold levels: When the CCI is above +100, it indicates that an asset is overbought, and when it is below -100, it indicates that the asset is oversold. Traders can use these levels to look for potential trend reversals or entry/exit points.

2. Spotting divergences: Traders can look for divergences between the CCI and an asset's price. For example, if an asset is making new highs while the CCI is making lower highs, it could indicate a potential trend reversal.

3. Using CCI as a momentum indicator: The CCI can also be used as a momentum indicator. When the CCI is moving up, it suggests that the momentum is positive, and when it is moving down, it suggests that the momentum is negative.

4. Combining CCI with other indicators: Traders can also combine the CCI with other technical analysis indicators, such as moving averages, to generate trading signals.

It is important to note that no single indicator can guarantee profitable trading outcomes, and traders should always use risk management strategies to limit potential losses. Additionally, traders should conduct thorough research and analysis before making trading decisions based on the CCI indicator.

AirAsia Downtrend To Continue

Lets look at AirAsia today.  This stock was on a downtrend from early July to Sep where a bottom was formed on 27 Sep 2012.  The rebound took the stock to RM3.19 around the 38.2% retracement level.   The rebound was on a lower volume meaning that investors are not convinced that we have seen the worst of the downswing.

A look at the GMMA indicator shows this picture.  The long term investors are not coming in to support the stock.  The separation of the long term moving averages are well spaced out.  With long term investors looking at further downside, there is only so much that the short term investors can do to prop up the stock.

There is a high probability that the stock will re-visit the RM2.81 level.  If this level holds and the stock is able to clear the resistance of RM3.19, then there is a chance of a change in trend.  Currently, the bears should still have the upper hand.

KLCI Still Bullish

US market had a bad closing last night.  Dow plunged by 243 points.  It seems like we are seeing more volatility recently.  With earnings starting to disappoint investors it is likely that the volatility will continue.

The KLCI chart formed an inverted hammer on 19 Oct.  This pattern is bearish and the black candle on 22 Oct confirms the bearish mood.  So where is the support level?

The first support is at 1649 the pivot low made on 15 Oct.  The next support will be at the 38.2% Fibonacci retracement level of 1641.  If 1641 fails to stop the sell down, the index is likely to test the 61.8% level of 1623

A look at MACD indicator shows that the trend is still bullish.   ADX indicator is indicating a sideway trading with value below 20 level indicating that there is no strong trend pattern at the moment.  The +DI is still above –DI indicator suggesting that any sell down will be a correction under the current bullish trend.