One of the key tenets of technical analysis is that price frequently lies, but momentum generally speaks the truth.

Momentum trading is a strategy that aims to capitalize on the continuance of existing trends in the market. The momentum investor believes in spotting large price movements.

A steady increase in the speed at which price is rising or falling suggests trend strength

However, too rapid an acceleration is often interpreted as a sign of ‘trend exhaustion’ or a ‘blow-off’ top (or bottom for downtrends) that suggests a final dramatic surge in optimism (or pessimism for downtrends) that drains out the remaining buyers (or sellers for downtrends) and sets up the end of a trend and coming trend reversal.

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