Technical analysis · updated October 21, 2026
What is price momentum
Momentum shows the direction and strength of the price's recent move: stocks that have risen a lot in recent months have positive momentum. Research shows that stocks with strong momentum tend to keep going in the same direction for a few months.
Price momentum formula
- Price one month ago
- The last month is skipped, because over it the price often reverses in the short term.
- Price 12 months ago
- The start of the period.
Worked example
Twelve months ago the stock was at $50, one month ago at $65.
The stock gained 30% in the 11 months before the last one.
How to read price momentum
Momentum is one of the most studied factors in the stock market, but it can reverse suddenly, especially after a crisis.
When price momentum can fool you
Sudden reversals: after a big market drop, the stocks that fell the most bounce first, and momentum loses a lot in a short time.
Related terms
Questions about price momentum
Why skip the last month?
Because over a single month the price tends to reverse a little. Without it, the signal is cleaner.
These explanations are for information only. They are not a recommendation to buy or sell.
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