1. TECHNICAL INDICATORS COMMODITY CHANNEL CHANNEL INDEX INDEX

2. OVERVIEW DEVELOPED BY DONALD LAMBERT Designed to identify cyclical turns in commodities. However, the CCI can be used effectively on any type of security. Designed to identify cyclical turns in commodities. However, the CCI can be used effectively on any type of security. High (Low) values indicate that prices are unusually high (low) compared to average prices High (Low) values indicate that prices are unusually high (low) compared to average prices

3. Developing the CCI Typical Price – SMATP.015 * Mean Deviation Typical Price of last period = (H+L+C)/3 Typical Price of last period = (H+L+C)/3 SMATP = SMA for the period equal to 1/3 of a SMATP = SMA for the period equal to 1/3 of a complete cycle (e.g.: 20 period SMA = 60 day complete cycle (e.g.: 20 period SMA = 60 day complete cycle.) complete cycle.).015 = constant necessary to ensure that 70-80%.015 = constant necessary to ensure that 70-80% of CCI values fall between +100 and -100 of CCI values fall between +100 and -100 Mean Deviation for the period Mean Deviation for the period

5. Lambert’s guidelines: Buy when CCI crosses above +100 scale line. Close position when CCI moves back below +100 Buy when CCI crosses above +100 scale line. Close position when CCI moves back below +100 Sell when CCI drops below -100 scale line. Close position when the CCI moves back above -100. Sell when CCI drops below -100 scale line. Close position when the CCI moves back above -100. Due to the implied constant (.015) in the CCI formula, a buy or sell signal should be in force only 20 to 30% of the time. Due to the implied constant (.015) in the CCI formula, a buy or sell signal should be in force only 20 to 30% of the time.

6. Overbought VS Oversold Readings above +100 imply an overbought condition and a pending price correction. A sell signal may be given when CCI drops back below +100. Readings above +100 imply an overbought condition and a pending price correction. A sell signal may be given when CCI drops back below +100. Readings below -100 imply an oversold condition and a pending rally. A buy signal may be given when the CCI moves back above –100. Readings below -100 imply an oversold condition and a pending rally. A buy signal may be given when the CCI moves back above –100.

7. DIVERGENCES Occur when a security’s price is making new highs (lows) while the CCI is failing to surpass its previous highs (lows) Occur when a security’s price is making new highs (lows) while the CCI is failing to surpass its previous highs (lows) Usually results in a price correction (rally) Usually results in a price correction (rally)

8. TRENDLINES CONNECT THE PEAKS AND TROUGHS OF CCI CONNECT THE PEAKS AND TROUGHS OF CCI FROM OVERBOUGHT LEVELS, A DECLINE BELOW +100 AND A TRENDLINE BREAK COULD BE CONSIDERED BEARISH FROM OVERBOUGHT LEVELS, A DECLINE BELOW +100 AND A TRENDLINE BREAK COULD BE CONSIDERED BEARISH FROM OVERSOLD LEVELS, AN ADVANCE ABOVE –100 AND A TRENDLINE BREAKOUT COULD BE CONSIDERED BULLISH FROM OVERSOLD LEVELS, AN ADVANCE ABOVE –100 AND A TRENDLINE BREAKOUT COULD BE CONSIDERED BULLISH

9. CCI for British Pound

10. BROOKTROUT CHARTS

11. Conclusions Effective measure, but use in conjunction with other indicators Effective measure, but use in conjunction with other indicators Test to find most appropriate time frame and buy/sell points for individual stocks Test to find most appropriate time frame and buy/sell points for individual stocks