Summary & Discussion of My Trading History of Clark Equipment (CKL) in Based on the Triangle Pattern

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

New World Technologies, Inc.
www.nwtai.com

Michael Fouche
mfouche@nwtai.com

Table of Contents

Introduction. 3

CKL Trading Executive Summary. 4

Discussion, Chart, & Results. 5

Original Return on Investment. 6

Alternative Return on Investment. 8

Conclusions. 11

Appendix – Transaction Receipts. 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.


 

CKL Trading Executive Summary

 

The following is a synopsis for this stock investment. 

Return on Investment (ROI)

71.3% in 7 months

 

 

Maximum possible ROI

358.7% in 31 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, Chart, & Results

 

I studied stock charts from the library – this was one of my first few trades.  CKL had the classic triangle pattern of short duration (similar to CAL) as shown below in Figure 1. 

 

Figure 1 – Original Chart from Library – Triangle Pattern

 

 

 

 

 

 

 

 

 

 

 

 

Original Return on Investment

 

The triangle pattern is a little more obvious in Figure 2 below.  I sold it for a 71% ROI after 7 months.

 

 

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.

 

 

Figure 3 – Transaction Summary

 

 

 

 

 

 

 

 

 


 

Alternative Return on Investment


CKL was acquired by Ingersoll-Rand for $86 per share, approximately 31 months after I purchased the stock.

From the L.A. Times:

Ingersoll-Rand acquired Clark Equipment at a share price of $86 - http://articles.latimes.com/1995-04-10/business/fi-53095_1_clark-deal

“The $86-a-share price represents a 12% increase from Ingersoll-Rand's previous offer for Clark, and a whopping 56% premium over Clark's trading price of about $55 in late March, just before Ingersoll-Rand launched its initial tender offer.”

 

Thus there was still a lot of upside to this stock – from the time of purchase, the stock increased in value by 358.7% in 31 months – as shown on the next page in Figure 5.  Obviously it would be not be easy to figure out exactly where the stock was going to top out before declining again.  However, while I sold out with a respectable 71.3% ROI in 7 months, I left a lot on the table since the total upside potential was 358.7%, which left plenty of room to sell out at a 100% or more ROI comfortably.  The point is that this triangle pattern successfully predicted that CKL would be a high-performing stock.

 

 



 

Figure 5 – Illustration of Actual ROI vs Potential ROI

 

 

 

 

 

 

 

 

A projected transaction summary of the “maximum projected ROI” of 358.7% (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

 

This was a classic triangle pattern that paid off handsomely – a 71.3% ROI in 7 months was pretty amazing.  However, had I been willing to wait a while longer, the ROI would have been much higher as the maximum possible ROI of 358.7% was reached when the company was acquired in 1995.  Thus I could have easily sold out for a 100%, 150%, 200%, etc. ROI by just waiting a while longer.

 

 

 


 

Appendix – Transaction Receipts


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

 

 

Stock Purchase Receipt

 

Stock Sell Receipt