Momentum measures the rate of change in asset prices over specific time periods, indicating the strength and persistence of price trends. Momentum analysis helps identify accelerating trends, potential reversal points, and overbought/oversold conditions. This technical concept is fundamental to many trading strategies and market timing approaches.

Momentum indicators include relative strength index (RSI), moving average convergence divergence (MACD), and rate of change calculations. Strong momentum often leads to trend continuation, while weakening momentum may signal potential reversals. Understanding momentum helps traders align with market direction and optimize entry/exit timing.

Real-world example: Tesla stock shows strong upward momentum with 25% gains over four weeks and RSI reaching 75, suggesting continued bullish sentiment but potential near-term overbought conditions requiring careful position management.