Intraday Momentum Index (IMI)

In general, momentum relates to how strongly you're moving in a direction. If you're on rollerblades and have too much momentum...hello, tree.

The Intraday Momentum Index measures whether a stock is getting a little wobbly on its skates. It's a technical indicator, which means investors use it to predict which direction a stock will go in the near future. Specifically, the IMI quantifies whether a stock has been either rising or falling unsustainably fast, tipping an investor to a possible turn-around.

During any span of time, a stock is going to have up days and down days. The IMI compares the amount of gains the security posted on its up days with the amount of losses it posted on its down days. If the ratio is out of whack to either extreme, it could suggest that a change of direction might be coming soon.

To calculate an IMI figure, first total the gains posted in up days for whatever period of time you're looking at. Then divide by the total gains on up days added to the total losses on down days. So...total gains divided by (total gains plus total losses), giving you a ratio of gains to total movement. It lets you know what percentage of all the movement was in the upward direction.

The resulting fraction is then multiplied by 100. That figure, a number somewhere between zero and 100, represents the IMI reading for the stock.

A big number (between 70 and 100) means that there have been lots of gains and not many losses (a score of 100 would indicate no losses whatsoever in the sample). It suggests that the stock has become overbought...it's flown a little too high, too fast, and might face a near-term correction.

On the other hand, an IMI number that comes in low (between zero and 30) suggests an oversold situation. The stock has seen lots of losses and not many gains. Bottom feeders and cockeyed optimists are bound to step in soon and start buying the stock, setting it up for a bounce.