Summary & Discussion of My Trading History of General Cinema (GCN) in 1991 Based on the Triangle Pattern

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

New World Technologies, Inc.
www.nwtai.com

Michael Fouche
mfouche@nwtai.com

Table of Contents

Introduction. 3

GCN Trading Executive Summary. 4

Discussion, Chart, & Results. 5

Original Return on Investment. 6

Alternative Return on Investment. 7

Conclusions. 9

Appendix – Transaction Receipts. 10

 

 

 

 

 

 

 

 


 

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.


 

GCN Trading Executive Summary


The following is a synopsis for this stock investment. 

Return on Investment (ROI)

9.4% in 2 months

 

 

Maximum possible ROI

140.3+% in 22 months

 

 

Reason for Purchase

Classic triangle pattern

 

 

Time Frame When Purchased

1991

 

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 – in this case I purchased shares of Harcourt Brace, for which I don’t have the original chart, and in a short time it was acquired by General Cinema – so effectively this was the pattern into which I was invested in – a classic triangle as shown below in Figure 1.

 

 

Figure 1 – GCN Chart from Library – Classic Triangle Pattern

 

 

 

 

 

 

 

 

 

 

Original Return on Investment

I purchased the stock (Harcourt Brace) in November of 1991, it was acquired and became General Cinema, and then I sold in January of 1992 with a 9.4% ROI as shown below in Figure 2 and Figure 3. 

 

 

Figure 2 – Closer Look at GCN Chart from Library – Classic Triangle Pattern

 

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

 

There was still a lot of upside to this stock – from the time of purchase, the stock increased in value by 140.3% in 22 months – as shown below in Figure 4.  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 9.4% ROI in 2 months, I left a lot on the table since the total upside potential was 140.3%, which left plenty of room to sell out at a 50% or 100% ROI comfortably.  The point is that this triangle pattern successfully predicted that GCN would be a high-performing stock (even though I came to own it “unwittingly”).

Surprisingly, the company later filed for Chapter 7 bankruptcy in October of 2001.  However, this was quite a few years down the road from this investment interval. 

 

 

Figure 4 – Illustration of Actual ROI vs Potential ROI

 

 

 

 

 

 

 

 

A projected transaction summary of the “maximum projected ROI” of 140.3% (assuming that I’d sold out at the maximum ROI percentage) is shown below in Figure 5.  Note that this does not account for transaction costs.

 

 

Figure 5 – Projected Transaction Summary

 

 

 

 

 

 

 

 

 


 

Conclusions

 

This was a classic triangle pattern that could have been a very decent investment if I had been willing to be a bit more patient.  The 9.4% in 2 months is not bad given that this is an average ROI that a mutual fund manager would be happy with for a year’s effort.  However, with some patience, I could have sold out for a 50% or 100% ROI while still being below the final upside limit of the stock.


 

Appendix – Transaction Receipts

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

 

 

Stock Purchase Receipt

 

Stock Sell Receipt