Momentum Entry Technique

The purpose of the Momentum Entry Technique (MET) is to give you a way to enter a trend-
ing market where there is no clear cut chart pattern you can use. The MET is a pattern that
offers a nice entry in the direction of the prevailing trend based on pivot points that form
due to resistance (in an uptrending market) or support (in a downtrending market). A break of
the pivot point, in the direction of the prevailing trend, is the entry signal. Confrmation from
the Trend Seeker (TS) trend rating concerning the direction of the trend is critical to the
success of this method.
When to Use the Momentum Entry Technique
As the name implies, this is a momentum-based trade setup. The idea is that a trending mar-
ket is being carried by momentum. But it reaches a point where it takes a breather and pulls
back a little, leaving behind a pointy area (a new level of support or resistance). Then the
momentum of the prevailing trend becomes active once more and prices resume movement in
the direction of the trend. As they do, they surpass the pointy area made earlier, which is our
signal to enter the market providing Trend Seeker confrms that the trend is still intact.
In an uptrend, we watch as prices rise until we see them pivot at a high (forming resistance)
and then begin to pull back down. We keep watching until prices eventually turn around and
begin to rise again. When prices rise above the pivot, we enter the market but only if Trend
Seeker says the markets trend is up.
In a downtrend, we watch as prices fall until we see them pivot on a low (forming support)
and start to pull back up. We keep watching until prices eventually turn around and begin to
fall again. When prices fall below the pivot, we enter the market but only if Trend Seeker
says the markets trend is down.
Sample Market Entries With the Momentum Entry Technique:
March 2013 Soybean Meal was a perfect candidate for the MET in the summer of 2012.
Prices were in a clear uptrend from early June. Then they formed a pivot point on July 19,
dropped, and then began to rise again. When prices surpassed the pivot point on August 10,
and with confrmation from Trend Seeker that the uptrend had resumed, an entry by purchas-
ing futures contracts or call options was signaled. If you missed that signal, or got stopped
out on the quick retracement that followed, another opportunity presented itself on August 17
when prices again surpassed the pivot point. After that prices made a nice move up.
(Please note that there are actually several pivot points on each of the charts. However, to
avoid clutter and confusion I elected to point out just one MET trigger on each chart.)
Now lets look at a market in a downtrend that would be a good candidate for the MET. The
Japanese Yen was in a downtrend that began in October 2012. On November 2 it hit an area
of support and formed a pivot point. Prices retraced and then turned back down. On Novem-
ber 15 they plunged through the pivot point and resumed the downtrend. With confrmation
from Trend Seeker that the trend was down, this provided an excellent opportunity to enter
the market by selling short futures contracts or buying put options, even though no other
chart pattern was present at that point.
How to Trade Using the MET
The MET can be traded with futures contracts or options.
If youre trading futures, you can have your orders in place with your broker prior to the
signal triggering. Simply place a buy stop order (in an uptrend) above the pivot or a sell stop
order (in a downtrend) below the pivot ahead of time. Then, if the market hits your price your
order will be triggered.
If youre trading with options, watch the market carefully as prices near your entry point.
When the signal is given, buy your options.
Always confrm the direction of the trend with the Trend Seeker trend rating before
entering the market. The prevailing trend must be resumed before you can enter the market.
This is the only way this method will work successfully.
Typically in a market with a strong trend the Trend Seeker trend rating will already be in
place when the price passes the pivot point. If for some reason the trend rating hasnt fipped
by the time prices have broken the pointy area, then pass on the trade at this time. If the
trend rating fips after the breakout, wait for a retracement to the pointy area and attempt to
enter at or near that price level once again.
Once you are in the market, use areas of support and resistance to select price targets. If
youre trading with futures contracts, be sure to put a protective stop in place and trail it as
the market moves in favor to help protect accumulating profts.
Summary
The Momentum Entry Technique is a very simple but handy method that allows you to enter
a market even though there is no formation. It uses pullbacks within a trend followed by a
burst of momentum that carries prices past a previous point of resistance (in an uptrend) or
support (in a downtrend). With confrmation from Trend Seeker that the prevailing trend has
resumed, you can enter the market with futures contracts or options. This is a great tool to use
to take advantage of trending markets that would not seem to be tradable otherwise.
Trading in commodity futures or options involves substantial risk of loss. According to many experts, most individual
investors who trade commodity futures or options lose money. Being a successful PAPER TRADER during one time
period does not mean that you will make money when you actually invest during a later period.
Past Results are not necessarily indicative of Future Results. Investment in commodity options for potential proft is
accompanied by the risk of loss of the entire investment. Your trading decisions should be based on your own particular
fnancial circumstances and trading objectives.
WARNING: FUTURES AND OPTIONS TRADING INVOLVES HIGH RISKS AND YOU CAN LOSE A LOT OF
MONEY.