[danteembermage]

Not necessarily! Suppose a bunch of noise traders are piling into a stock because all seven green lights are on in the software they bought for 29.95 from an infomercial. Let's take as an assumption that this algorithm has no idea what it's doing. The smart money thing to do would be to buy now (since investors are going to keep buying as they notice their text alerts or sound alarms or whatever tells them to buy the stock) then sell again knowing full well you are driving the price further from fundamentals in the short term. The best response to past irrationality is to trade against it. The best response to future irrationality is to trade with it. That irrational behavior might be forecast-able should not be a huge surprise.

Momentum is a well established empirical regularity in stock prices. Knowing this, you trade with the momentum at then trade against it later. This does not help momentum go away.