What happens to momentum signals as they move towards the zero line in exit strategies?

Momentum signals are key indicators used in technical analysis to assess the strength of a trend. As they approach the zero line, the momentum signals indicate a potential shift in the trend's strength. When momentum is above the zero line, it typically suggests that the security is in an upward trend, whereas momentum below zero indicates a downward trend.

As momentum moves toward the zero line, it is often interpreted as a sign that the current trend is weakening. The closer the momentum gets to zero, the less effective it becomes as a signal for continuation of the trend—whether it is upward or downward. This diminishing effectiveness suggests that traders should be cautious, as this could imply an impending reversal or at least a significant slowdown in the existing trend.

The other options do not accurately reflect the behavior of momentum indicators. They imply a constant strength or increasing intensity as momentum approaches zero, which contradicts the typical interpretation observed in market analysis. Overall, understanding that momentum becomes less effective as it approaches the zero line is crucial for devising appropriate exit strategies based on these signals.