What does momentum in market analysis indicate?

Momentum in market analysis primarily refers to the strength or speed of price movements over a specific period. It indicates the tendency of an asset's price to continue moving in the same direction, either upwards or downwards, based on the prevailing momentum. The correct interpretation involves considering how current price action compares to past price actions, enabling analysts to gauge whether momentum is building or waning.

When momentum is positive, it means that prices are rising, and this indicates a strong buying interest. Conversely, negative momentum signals falling prices, often indicative of selling pressure. Traders use this information to identify potential continuations or reversals in trends—essentially assessing whether the price is likely to maintain its current trajectory or shift based on historical price behavior.

The other options presented do not capture the holistic idea of momentum as related to both the comparative strength and direction of price movement. While sharp movements in one direction, resistance levels, and trend reversals may be relevant concepts in technical analysis, they do not specifically define what momentum entails in the context of market analysis.