How to see the market context using CCI

Written by Buzz 4 of 5

Here is another excellent example of two popular patterns. The first is a Shamu and the second is a Ghost. A Shamu is formed when the 14 CCI forms a peak and then drifts towards the zero line just like the previous ZLR. It bounces up and then quickly reverses and goes through zero continuing in the original direction. The Shamu pattern can work both ways and will have the same name. The ideal trigger point on a Shamu is when the CCI crosses through the zero line.

The Ghost pattern is very similar to a head and shoulder pattern, but is only viewed on the CCI and not the price bars. It has a head and shoulder on either side. The Ghost also works both ways but if the head is downward, they it is referred to as an Inverted Ghost. The ideal trigger on a Ghost pattern is when the 14 CCI line breaks through the neck line of the Ghost.

Looking at the above chart, it easy to see that the trend is down. The 20 and 34 EMA show a downward bias and the 50 CCI is red and below the zero line. The only triggers I would be looking for would be short triggers. There are other triggers visible on the above chart, but if you just took the Shamu and the Ghost, you would have taken two very nice short trades with the trend. Your money would not have been at risk very long and you would have been able to move your safe stop to break even very soon after entry. Then just sit back and manage your
trade.

IF THE 34 EMA LINE IS FLAT DO NOT TAKE THE SIGNALS. THE MARKET IS IN CHOP.

Time to build on your new understanding again as we now move away from CCI patterns like ZLRs, Shamus and Ghosts for a bit and look at TLBs or Trend Line Breaks. For our purpose here, every example will only show you TLB patterns that are with the trend. Woodie likes to draw his trend lines from a peak or valley where the point is greater than -100 or +100, ideally as close to the -200 or + 200 line as possible. It does not matter to Woodie if he draws it from a peak or valley based on the 6 period turbo or the 14 period CCI. For clarity again, I have the 6 period turbo turned off in the following examples.

Obviously the trend is down. The EMA dots confirm it and so does the 50 CCI. The blue lines that I have drawn in over the 14 CCI are my trend lines. Since I only want to take short trades to match the trend, I will only take the trades the break through these lines. The first two TLB patterns along with the 4th TLB pattern to occur were each preceded by a ZLR. Your entry point would be as the 14 CCI line crosses over the trend line. The third TLB happened after a larger pullback. The 14 CCI actually went above the zero line and formed a nice hook at about the +150 line and then came back through zero and the trend line at the same time. The price also tested the over head resistance at the 34 EMA line and failed there as well. The last one was just a regular TLB. All of them worked. All of them were with the trend. All of them followed what Woodie has been teaching for years. Classic CCI!

IF THE 34 EMA LINE IS FLAT DO NOT TAKE THE SIGNALS. THE MARKET IS IN CHOP.

Here we see the same chart that we used previously with the Shamu and the Ghost pattern. Can we use TLB lines to enter the trade short to give more weight to our entry? Sure. Same logic as before. The trend is down so we will only take short triggers based on TLB and patterns. They all worked again.

IF THE 34 EMA LINE IS FLAT DO NOT TAKE THE SIGNALS. THE MARKET IS IN CHOP.