Identify the Weakening Momentum or Trend Strength in a Stock
Always have a dialogue running through your head about what you will do based on various developments. Here developments means price action development or change in the prevailing momentum.
"Strong Momentum of price trend will weaken. Like Price breakout may create a new momentum" These are examples of developments in price action
Momentum getting Weakening
It means that the ongoing price movement(Whether it is Up or Down) strength or Velocity is lowering. price will have only slow movement, or no movement, to up or down. There are two situations where price movement strength often weakening. In this type of Movement, Price Moves without volume. Ie. Lack of Volumes is the main reason of this Momentum Weakening. Price may be rising but Volume is decreasing.
1. It may be a short term pause in a large movement,
2. or it may be a prior movement before trend change.
If it is a short term pause in a large trend, Price will resume its movement when new high volume arrives. Or a correction may be inevitable in this stock for the accumulation.
If this is a prior to trend/Momentum change, we can see Large quantity of the stock would have traded just before the trend weakening.
Cause of this Momentum Weakening - The cause of trend weakening often may be the Lack of interest in demand or supply. If Demand is of a stock decreasing, price upward may movement will also being weakening. Likewise if supply of a stock is decreasing, The stock's downward movement will also be weakening.
In this stage or Price Movement, Volume is will be Decreasing. Means Investors Considered it is Overbought/ Oversold Situation. A correction is Inevitable for investors accumulate the stock.
Analyse the Volume of the stock to identify momentum weakening. Price Movement without volume will not be sustained. It cause slow movement of price do not expect large price movement
we can see Price breakout previous high without volume, This breakout will not be sustained. Do not expect large price movement. Price moves very slowly in this types of situations.
Identify weakening Trend Strength
Trend forming with Impulsive and Corrective Price Movement. If trend is up, 1 impulsive move will be in upward and corrective Move to downward. Generally Impulsive should be larger than corrective waves in a trend. If corrective wave is bigger than impulsive, we can not say it is a trend.
One simple trick is to know momentum weakening is look at the length of impulsive and corrective waves. In Uptrend, if corrective wave is bigger, the current trend is ended. In all Momentum weakening stage, Corrective waves will be bigger than Previous Impulsive Move.
"Strong Momentum of price trend will weaken. Like Price breakout may create a new momentum" These are examples of developments in price action
Momentum getting Weakening
It means that the ongoing price movement(Whether it is Up or Down) strength or Velocity is lowering. price will have only slow movement, or no movement, to up or down. There are two situations where price movement strength often weakening. In this type of Movement, Price Moves without volume. Ie. Lack of Volumes is the main reason of this Momentum Weakening. Price may be rising but Volume is decreasing.
1. It may be a short term pause in a large movement,
2. or it may be a prior movement before trend change.
If it is a short term pause in a large trend, Price will resume its movement when new high volume arrives. Or a correction may be inevitable in this stock for the accumulation.
If this is a prior to trend/Momentum change, we can see Large quantity of the stock would have traded just before the trend weakening.
Cause of this Momentum Weakening - The cause of trend weakening often may be the Lack of interest in demand or supply. If Demand is of a stock decreasing, price upward may movement will also being weakening. Likewise if supply of a stock is decreasing, The stock's downward movement will also be weakening.
In this stage or Price Movement, Volume is will be Decreasing. Means Investors Considered it is Overbought/ Oversold Situation. A correction is Inevitable for investors accumulate the stock.
Analyse the Volume of the stock to identify momentum weakening. Price Movement without volume will not be sustained. It cause slow movement of price do not expect large price movement
we can see Price breakout previous high without volume, This breakout will not be sustained. Do not expect large price movement. Price moves very slowly in this types of situations.
Identify weakening Trend Strength
Trend forming with Impulsive and Corrective Price Movement. If trend is up, 1 impulsive move will be in upward and corrective Move to downward. Generally Impulsive should be larger than corrective waves in a trend. If corrective wave is bigger than impulsive, we can not say it is a trend.
One simple trick is to know momentum weakening is look at the length of impulsive and corrective waves. In Uptrend, if corrective wave is bigger, the current trend is ended. In all Momentum weakening stage, Corrective waves will be bigger than Previous Impulsive Move.
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