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In this article we will explain several of the patterns and the logic behind them.
The first pattern of the CCI is the Zero-Line Reject, and it is a method I personally find very profitable. The logic of this pattern is that the CCI touches or comes close to the zero-line (the level 0) and immediately bounces back.- Usually it is required that price stays at least 6 bars above the zero-line (for long trades) or below the zero-line (for short trades).
The logic behind this pattern lies in the formula of the CCI: The Commodity Channel Index shows us the average distance between price and the 14-period Moving Average. Therefore, a zero-line-reject is in fact showing us that price touches the moving average and bounces in the trend-direction. You can place a moving average of typical price on the chart and see it for yourself.