Advance-Decline Momentum

Momentum measures the rate of change of prices or indicators as opposed to the actual levels themselves. To construct a 20-day momentum line of the advance-decline line, simply subtract the number 20 days ago from the readings today. This positive or negative value is then plotted around a zero line. If the momentum line begins to flatten out or to drop toward the zero line while the advance-decline line is still advancing, the uptrend is losing momentum. While prices may still be advancing, the rate of velocity has leveled off and caution is warranted. The reverse is true in a downtrend.