Is momentum confirming price?
There are two types of momentum analysis. One is “momentum inversion”. The other is price/momentum confirmation. Take a look again at the Sigma Bands™ chart below. Chart 11 On the chart above for the Canadian Dollar we see that the Canadian Dollar made a new high and then tried two more times to break its previous high. But notice that as the Canadian Dollar made the next two highs the red momentum line was not making a new high but rather had “highs” that were actually less than their previous momentum highs. In other words, momentum was falling as prices were either rising or testing their previous highs. This is a classic case of momentum not confirming price increases and is the second criteria we look for when we are looking for a price reversal beginning to take place. It goes without saying that the reverse situation holds. If the prices are falling to the minus two Sigma levels, or better, and the momentum is not confirming, then good news! The minus two Sigma level is probably
