ASCENDAS REIT: JUMPING ON THE BANDWAGON?

Technicals

ASCENDAS (DAILY Chart) had a price drop after a head and shoulder price pattern was formed which singal an uptrend reversal, however a three inside up pattern was formed after the drop which is and indication of a trend reversal. Taking a look at the RSI we can see that it has rised above 50 which indicated an uptrend and the MACD has started converging and shows bullish movement.

Criteria for Three Inside Up Pattern

1. The first candlestick is long and bearish, indicating that the market is still in a downtrend.

2. The second candlestick is bullish and should ideally close at the halfway mark of the first candlestick.

3. The third candlestick is also bullish and closes beyond the open of the first candlestick, ideally above the high of the second candle.

What we can tell from a Three Inside Up Pattern

As the market comes from a bearish trend, a majority of market participants are bearish on the market and believe that it will continue down for even longer. As such, selling pressure is high, and makes the market form the first bearish candle of the pattern.

However, the next day bears seem to have gotten depleted of their energy in the preceding bearish run. Bulls stand ready to take the chance that’s thrown at them and manage to make the market perform a bullish gap. During the rest of the day much doesn’t happen, and the market closes within the range of the previous candle.

The fact that bulls had the stamina to not give in for the bearish forces that wanted to push the market below the low of the previous candle becomes a major sign of strength. However, it’s not enough to assume that bears have given up just yet.

Regardless, it doesn’t take long before most market participants realize that the trend has reverted, as the market closes above the high of the previous two candles, which is a major resistance level.

Three Inside Up Trading Strategies

Volume can have a significant effect on the performance of different patterns. Traditionally, high volume is regarded as a sign that a certain market move is more significant.

In the case with the three inside up, we might want to demand that the last, bullish candle forms with higher volume, since it would suggest that the market was more keen on performing bullish moves than bearish.

As such, we’ll go long if:

There is a three inside up

The last, bullish candle forms with high volume.

Then we wait for 5 bars to exit the trade.

Trading Strategy 2: Three Inside Up and Breakout Distance

One common approach to mitigating false breakouts, is to add some distance to the breakout level. And since we easily can regard the three inside up as a breakout pattern, as it breaks out over the high, this is applicable to the pattern too!

We’ll simply demand that the last candle closes above our breakout level, which is the high of the pattern plus half the average true range.

Thus, the conditions to enter a trade are:

There is a three inside upThe last candle breaks out above the breakout level, which is the high of the pattern plus half the average true range. Then we wait for 5 bars to exit.

Fundamentals

Ascendas REIT (A17U.SI), Singapore's oldest business and industrial REIT, have been the spotlight of many investors lately as major banks have upgraded its rating to Buy and increased its price targets. Today, we will be analysing if Ascendas REIT is really worth a buy at its current price and also its future outlook.

During this COVID-19 period, A-REIT have managed to achieved an impressive 88.8% occupancy rate at home and 97.5% in both Australia and the United Kingdom. This will ensure that A-REIT sees consistent and stable cash flow from even when corporations are allowing their employees to work from home. Also, one important thing to note is the slight improvement of its overall occupancy rate of 91.9%, up from 91.5% compared to 2Q 2020 according to its 3Q FY 2020 update.

Looking at its financials, A-REIT seems to be well-poised to take up any good bargains when the opportunity arises. As of 30 Sep 2020, total debt stood stood at 4.8 billion compared to total asset at 13.8 billion. With a healthy aggregate leverage of 34.9%, A-REIT is well poised to scoop up any cheap deals when the opportunity arises.

Credit: Ascendas Reit 3Q FY2020

We expect A-REIT to be more aggressive in acquiring new locations, particularly focusing on its overseas market due to depressed property prices that are caused by the COVID-19 pandemic. In the FY 2019 highlight, CEO, Mr William Tay have mentioned that A-REIT plans to remain a Singapore-centric REIT with 60% to 70% of investments in Singapore. The portfolio of A-REIT investments in Singapore stood at 72% in FY 2019 and currently, only at 70% as at 30 Sep 2020. We expect that this number will continue to go down as A-REIT focuses on expanding abroad.

This is already evident in its recently planned slew of acquisitions in Australia and also the recent of $100m million Green Bond and $300m Green Perpetual Securities. A-REIT is getting ready for something big.

Conclusion : Based on the technical and fundamentals analysis, we are bullish on ASCENDAS REITS and see this as a good buy in opportunity as it had a bullish break on the 50 and 200EMA and is currently touching the 200EMA.

Disclaimer: This is purely for educational purposes and does not constitute to any form of financial advice.