Commodity Channel Index (CCI) and Technical Analysis in Investment Analysis and Portfolio Management

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Investment Analysis and
Portfolio Management

Executive Summary
Efficient Market Hypothesis is vital as it provides strong support to the fundamental asset value.
However, the existence of noise traders leads to some disturbance in the fundamental value that
persists over time. This led to the concept of technical analysis that enables the decision making
of the investors. One of the priority tools that is used in this scenario is that of Commodity
Channel Index (CCI) that is discussed in the report.
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Contents
Introduction and Data Analysis....................................................................................................................3
1a. Technical Analysis..................................................................................................................................3
1b. Popularity in the last year......................................................................................................................4
1c. Role of crypto currencies in investments...............................................................................................5
1d. Trend of the crypto currency.................................................................................................................6
2. Data collection.........................................................................................................................................6
3. CCI background........................................................................................................................................7
Analysis and Evaluation:..............................................................................................................................8
Conclusion.................................................................................................................................................10
References.................................................................................................................................................11
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Introduction and Data Analysis
1a. Technical Analysis
Using various market analysis tools to find out the reasons for the deviation of company
fundamentals and finding ways to eradicate the deviation is the job of technical analysis. It is in
nature a discipline of study, which employs the study of evaluation of investment options. It is
intrinsically a trading discipline. It uses past trends of an investment to decide investment options
on an investment. The nature of trends can vary from price movements to volume changes. All
these past trends act as statistics for investment decisions and calculations (Parrino, Kidwell &
Bates, 2012). Furthermore, in order to apply technical analysis, a past history of the trading is a
must. Hence technical analysis can be applied on shares, futures, bonds, commodities,
currencies, etc. to name a few. In short, all those investment options that trade, and have been
trading for quite some time, technical analysis can be applied to them.
For a layman to understand the concept, it can safely be said that any market financial
instrument, which is being traded on the exchange regularly or periodically, and has sufficient
trading history so as to use its past trends to analyze the performance of the stock and thereby
take investment decisions by predicting its future based on its past trends. So, this is what
technical analysis means.
The technical analysis concept is built upon assumptions. The key assumptions are as follows:
1. Artificial or non-natural price changes do not affect- dividend payouts, share repurchases
and/or share splits etc. result in artificial price changes. And the form of distribution of money
into the market also results in an artificial change in prices (Petty., Titman., Keown., Martin.,
Burrow. and Nguyen, 2012). This makes decision making using the market data difficult
because of an unnatural price change, however, the basic market value remains unaffected.
2. Liquidity- for accurate and efficient decision making, it is assumed that a share or security is
highly liquid. Stocks with high mobility in the market are easier to trade and result in less
deviation of prices because of the ready and steady demand and supply. This results in lesser
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