The Rail Road Ties Pattern in the Oil Trading Room

By Mike Wilt

I writing this to make sure there is clarity between the RRTies and RRT (Railroad Track) patterns I make reference to periodically in the oil trading room.  I see people use the names interchangeably.  RRTies is a multiple 10 tick pattern while RRT is a 2, 10 tick bar pattern.  To me a RRTies pattern is a RRT pattern that did not work out.

RailRoadTiePattern

Here is a 3 bar RRTies pattern.  These beasts can be 4, 5 or more consecutive bars.  If you recall from yesterday’s blog on RRTs, the green reversal bar inside a red background is a good short pattern.  Here it clearly is within a down cycle.  (A) marks the aggressive entry and (C) is where you might make a more conservative entry for the RRT pattern.  There appears to be ample reason to enter aggressively at the open or higher of the following red bar.  If you would have done that and taken your 1st Profit Target around 10 ticks your losses on this trade would be negligible when the RRT pattern morphed into a RRTies pattern and reversed higher.  I usually set my stop high enough to allow a 5 bar candle to form (green in this case).

CL is a market that we know has big, long sustainable runs.  Most of us would prefer to have them run in one uninterrupted movement of red or green MB candles.  When there are a large number of RRTies patterns in a day, I automatically become more conservative in my trade selection.  As I was scrolling through the charts to find examples of RRTies, I noted that many days had zero RRTies patterns.  Those normally are the best trading days for me.  Here is November 26 chart.  Notice how many 4 and 5 bar clusters there were this day (marked with X).  Also notice how inconsistently they broke out of this pattern.  Some of them started with a red background (you would have expected continuation down) and it broke out higher while many of them had a green/red background and broke out in the direction of the background.  I can find no trading edge from these patterns other than to expect not to trade.

RailRoadTies2

In summary, I dislike RRTies patterns because they mean short term confusion to me.  I avoid them like the plague.   If anyone out there has found some useful way to interpret this pattern, let us know.

Good trading!

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