A stock's momentum is a study of chage in price in light of how quickly that changes takes place. If there is a discrepancy between a stock's momentum and its price progression, this can equal trouble for the stock because a drop in price is likely at some point in the future.
However, these changes do not necessarily take place right away. Divergences between price and momentum on a chart can take place for quite a while before a reversal takes place, so momentum is more of a long term predictive tool. Momentum can also be a measure of a stock's integrity. The momentum will expose any overbpught or oversold conditions that the stock may be facing.
Momentum is measured by several different methods. The Moving Average Convergenc/Divergence (MACD) indicator is a widely used formula that can be used to measure a stock's momentum over the course of time. Althoug this indicator will sometimes predict price reversals, it oftentimes does not show a reversal until shortly after the fact. As a momentum oscillator, the MACD acts as a predictor for the ups and downs of a stock's price.
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