“Every object in a state of uniform motion tends to remain in that state of motion unless an external force is applied to it.”
So why do investors (myself included) believe that prices will continue to move in the same direction they are already moving in (whether that's up, down or sideways)? It's because they believe in the idea that crowds move as crowds. The same way that herds move as herds. It's the idea that once a stock moves in a certain direction investors will notice the move and jump on the bandwagon for the ride (up or down). This is often summed up in the term "the trend is your friend". It's the idea that you are suppose to invest with the trend and then stay with that trend until the trend ends (assuming you can recognize the end of the trend!).
That's harder to do than it sounds. Every stock has a range that it trades in every day and it often trades up and down within that range all day long. It's only when you chronologically separate trading segments that you can truly begin to understand what's happening. It's divide (time) and conquer. For most investors this segmenting is done on a daily basis and the result is a daily chart. Long term investors will segment along weekly lines and this will result in weekly charts. Day traders will segment along several intervals of 60 minutes, 10 minutes, or even one minute to get intraday charts. Once you begin to do this you begin to see patterns.
"Prediction is very difficult, especially if it’s about the future."
The momentum indicator I rely on the most is the MACD. The MACD's best attribute is identifying turns in the market (this is very important for swing traders!). When it's below the zero line and beginning to turn up, I take notice because something's about to happen. When it crosses it's signal line, I also take notice. When it crosses from below to above the zero line, I take notice once again.
And when it does the exact opposite of these things, I also take notice.
The other two indicators I like to use are the RSI and the ADX. The ADX tells me the strength of the move that might be under way. It lets me know if the movement up or down has any power behind the move. It therefore lets me know if the move will have any stamina or staying power to it. The RSI, on the other hand, lets me know when the move is getting over heated or nearing exhaustion.
"The future ain’t what it use to be."
In the final analysis, the past will provide me with a lot of information but it won't guarantee the future direction of the price of the stock. Stocks will go only where investors push them. My simple intent is to determine if a stock's price is moving up, moving down or going nowhere, to determine if a stock's turning up or turning down, and to determine the strength of the movement. And hopefully, after all is said and done, I'll be on the right side of the trade.