Strength Figure by Alex Saitta
Here’s an indicator that captures the amount and the distance of price thrusts.
Technicians measure the strength of a market trend by examining trading volume, open interest, or price momentum. Most who choose momentum graph the price above and a momentum line below. Figure 1 plots the Standard & Poor’s 500 futures, and the difference between the most recent close and the close 15 days prior —the 15-day momentum line. In this case, the momentum was positive, so the price trend was up,but as the market rose, momentum fell. The divergence between the direction of the price (rising) and the momentum (falling) indicated the uptrend was losing strength and the trend was approaching its end.