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Woodies CCI is a momentum indicator that was invented by a gentleman named Ken Woods. The indicator is based on the 14-period Commodity Channel Index (CCI). It is an oscillator that oscillates around a zero line and has no upper or lower boundaries. The main principle is that market price will move in the same direction as the Woodies CCI.
When Woodies CCI is above the Zero-Line, or positive, this represents an uptrend or a bullish opportunity.
When Woodies CCI is below the Zero-Line, or negative, this represents a downtrend or a bearish opportunity.
Calculation:
CCI = Typical price - SMA / Constant * Mean Deviation
Typical price = (High + Low + Close) / 3
SMA = 20-day simple moving average constructed from a typical price.
Mean Deviation = Sum of differences between the Typical price and SMA in absolute value. It&s all divided by 20.
Constant = 0.015. It serves to make 70-80% of all CCI values within the range of +/- 100.
