Picking up the momentum

Some months ago, I wrote that "there's momentum, and then there's momentum". I caught flak from readers, many of whom thought it was a joke. However, the statement was serious. Few terms in investing have such a dual personality as momentum. There really are two kinds of momentum in stock prices. As I'd pointed out, following prices is the most basic trading method, and it works. When a stock price rises, there's always an underlying reason. It could be good: investors have discovered why the price should legitimately be higher. Or bad: prices are rising because somehow they've started rising, and people are buying hoping prices will keep rising. Effectively, these are the two different types of momentum I mentioned. A rise in stock price is a signal - it could be meaningless, misleading, or useful. In the world of stock movements, not all signals are