Summary & Discussion of My Trading History of CALFED (CAL) in 1992 Based on the Triangle Pattern

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

New World Technologies, Inc.
www.nwtai.com

Michael Fouche
mfouche@nwtai.com

Table of Contents

Introduction. 3

CAL Trading Executive Summary. 4

Discussion, Charts, and Results. 5

Original Return on Investment. 6

Alternative Return on Investment. 8

Conclusions. 11

Appendix – Transactions. 12

 

 


 

Introduction

 

In 1989 I was introduced to Ted Warren’s book, “How to Make the Stock Market make Money for You” (originally published in 1966) – his claim was that one could discern specific patterns in stock histories to predict future performance (this is also called “Technical Analysis”).

In order to validate his claims, I studied many stock charts from the local library in 1990 – interestingly I found that the same type of patterns that Warren had used as examples from the 1950s and 1960s, were also present in the stocks that I’d studied from the 1970s and 1980s. 

Thus the next step was to begin investing - which is where the “rubber meets the road” so to speak, using the techniques that he had described in this book. 


During the early, mid, and late 1990s, I was successful for the most part, in selecting and investing in good stocks based on specific patterns – my primary downfall was in not being patient enough to wait for the stock to meet its full potential.

This document discusses the details of one of thirty documented stock investments which were made based on the patterns discerned from that particular historical stock profile.


 

CAL Trading Executive Summary

 

The following is a synopsis for this stock investment. 

Return on Investment (ROI)

159.2% in 7 months

 

 

Maximum possible ROI

258.6% in 47 months

 

 

Reason for Purchase

Classic triangle pattern

 

 

Time Frame When Purchased

1992

 

The next two sections include more details on the reasons for the trade, the trading history, and the maximum potential ROI. 

Copies of the original stock transaction receipts, for each of the trades (buy and sell), are included in the appendix at the end of this document.

 


 

Discussion, Charts, and Results

 

I studied stock charts from the library – in this case, CAL appeared to have a triangle pattern of short duration – just a couple of years as shown below in Figure 1. 

 

 

Figure 1 - Original Chart from Library – Observed Short Triangle Pattern

 

 

 

 

 

 

 

Original Return on Investment

 

Not long after I purchased the stock there was a reverse split and I was issued warrants as well.  Six months after purchasing the stock I sold it – the total ROI, from sale of stock and warrants, was 159%.  The buy and sell points are marked in the stock profile below in Figure 2.

 

 

Figure 2 – Observed Pattern and Buy / Sell History

 

 

 

 

 

 

 

 

The transaction summary for this investment is shown below in Figure 3.  Note that this does not account for transaction costs.  There was a 1-for-5 stock split, thus 634 shares divided by 5 = 126.8 shares.  The 0.8 shares was credited to my account in cash and I remained with 126 shares (in addition to the warrants).

 

 

Figure 3 – Transaction Summary

 

 

 

 

 

 


 

Alternative Return on Investment

 

There was still some upside to this stock – it was acquired for $23.50 per share in November 1996 – the write-up below describes the acquisition and the scenario is shown on the next page in Figure 5.  If I had waited, the original ROI of 159.2% (gained in 6 months) would have grown to 258.6% in another 3 ½ years.

From - https://www.tulsaworld.com/news/first-nationwide-to-buy-cal-fed-in-thrift-merger/article_c1b02b0f-4e0d-5b03-8017-e29c46d9d2d0.html:


LOS ANGELES (AP) -- Cal Fed Bancorp agreed Monday to be acquired by First Nationwide Holdings Inc. billionaire Ronald Perelman's thrift holding company, in a nearly
all-cash deal worth more than $1.2 billion. The merger will create the nation's fourth largest savings and loan with about $30 billion in assets and 235 retail branches. The merged company will be based in San Francisco.  Few branch closures are expected; San-Francisco-based First Nationwide Bank operates mainly in Northern California and California Federal Bank mainly in Southern California and Nevada.  Cal Fed stockholders will receive $23.50 per share under the merger, which is expected to close early next year. On the New York Stock Exchange, Cal Fed shares rose $1.25 to $22.62 1/2 on the news.

 

 

 

 

 

Figure 5 – Illustration of Actual ROI vs Potential ROI

 

 

 

 

 

 

 

 

 

 

 

 

 

A projected transaction summary of the “maximum projected ROI” of 258.6% (assuming that I’d sold out at the maximum ROI percentage) is shown below in Figure 6.  Note that this does not account for transaction costs.

 

 

Figure 6 – Projected Transaction Summary

 

 

 

 

 

 


 

Conclusions

 

It is questionable as to whether it would have been worth the wait and it really depends on perspective and investment objectives.  Had I waited another 41 months (about 3 1/2 years), the final ROI would have been 258.6% in almost 4 years versus the original 159.2% in 6 months.  In other words, I would have had to wait another 3 1/2 years for an extra 100% ROI.  One could argue that it would have been better to take the 159.2% ROI gained in 6 months and then reinvest that amount in another stock that potential could grow 100% or more in 1 to 3 years.

Appendix – Transactions

The records of the purchase and sell transactions are shown below.

 

 

Stock Purchase Receipt

 

Stock Split Notification

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Stock Split Notification

Stock Sell Receipt