Many leading indicators come
in the form of
momentum
oscillators. Generally speaking,
momentum
measures the rate-of-change of a security's
price. As the price of a security rises,
price momentum
increases. The faster the security rises
(the greater the period-over-period price
change), the larger the increase in
momentum.
Once this rise begins to slow,
momentum
will also slow. As a security begins to
trade flat,
momentum starts to actually decline
from previous high levels. However,
declining momentum
in the face of sideways trading is not
always a bearish signal. It simply means
that momentum
is returning to a more median level.
