If underlying prices make a new high or low that isn't confirmed by the Momentum Indicator, the divergence may signal a price reversal.

Here is how the calculation of the momentum goes about

Momentum = Price today - Price (n) periods ago

Please note that the closing value of the Price Series is used in this case. Also, (n) is a subjective number and you have to use your discretion to decide whether the (n) should be pegged at 10 days or 20 days.

Katherine Gonsalvesanswered.If underlying prices make a new high or low that isn't confirmed by the Momentum Indicator, the divergence may signal a price reversal.

Here is how the calculation of the momentum goes about

Momentum = Price today - Price (n) periods ago

Please note that the closing value of the Price Series is used in this case. Also, (n) is a subjective number and you have to use your discretion to decide whether the (n) should be pegged at 10 days or 20 days.