Initially, Cloak Tracker only shows the green effect on enemies when they first activate cloak and if they are within a 20 metre radius of you. Upgrade II makes the effect show on already cloaked enemies when they've been within the 20 metre radius for 7 seconds. Upgrade III decreases this time to 5 seconds.
If you're sure they're cloaking within that radius and not showing up then I'm not sure why. I have Cloak Tracker III and everything seems to work fine for me.