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  • Writer's picturePeet Serfontein

Interpreting the Heatmap: Comparing Value Traded to the Daily Average Value traded for JSE shares

What is a Heatmap?

This heatmap displays value trader data regarding the top 60 JSE (Johannesburg Stock Exchange) shares. It depicts how their last value traded compares to their average daily value traded over the last 20 days.




Share Tickers:

Each block or cell in the heatmap is labelled with a ticker symbol, representing a particular share on the JSE. For example, "IMP" or "NPN" are tickers for specific companies listed on the JSE.


Axes:

The x-axis represents the "Percentage of Average Value Traded", ranging from zero to positive percentages. It illustrates the daily variations in a share's trading volume (value traded), where increased positive values indicate an increase in the value of shares traded.


Block size:

The size of each block signifies the "Value Traded" for a particular share in a day, compared to its 20-day value traded, expressed as a percentage. The greater the block size, the more significant the increase in value traded. Furthermore, blocks with a reddish hue indicate that the value traded is associated with a volume spike. In essence, a volume spike refers to a sudden and notable increase in the number of shares traded in a short period, often signalling heightened traders and investor interest or activity in that particular share.


"Value Traded" denotes the total monetary amount of a specific share exchanged on the equity market within a given day. It is determined by multiplying the volume of shares traded with their average trading price for that day.


Formula:

Value Traded = Number of Shares Traded × Average Trading Price of the Share


Average Value Traded Per Share, is the average of the daily traded values for the last 20 trading sessions. It provides a more stable measure to compare against a single day's value traded.


Formula:

Percentage of average value traded = Value traded for one day ÷ 20-Day Average Value Traded


How to Use the Heatmap:

The presence of various colors from blue to red suggests that there's a diverse trading behavior among the top 60 JSE shares. Some share are experiencing a surge in trading activity, while others are seeing less than usual.


The shares in the red zone might be experiencing significant events, news, or developments leading to heightened trader and investor interest, resulting in higher trading volumes.


Conversely, the shares in the blue zone could be in a consolidation phase, or there might not be any significant news driving the share, leading to decreased interest and trading activity.


Interpretation

Liquidity Indicator

A higher average traded value suggests that the share is more liquid, meaning it can be bought or sold in larger quantities without causing significant price movements. This can be beneficial for large institutional investors who need to make big trades without impacting the price too much.


Trader and Investor Interest

A sudden spike in the daily value traded compared to the 20-day average can indicate heightened trader and investor interest, either due to recent news, earnings announcements, or other market events.


Value Traded Per Day > 20-Day Average (large red blocks):

When the value traded on a particular day is significantly higher than the 20-day average, it could signify increased buying/selling activity. This could be due to recent positive/negative news, earnings beats/misses, or sector-specific developments. Such spikes warrant further investigation into why traders and investors are showing increased interest.


Value Traded Per Day < 20-Day Average (large blue blocks):

If the value traded on a particular day is much lower than the 20-day average, it might indicate decreased interest or a potential consolidation phase. In such cases, traders and investors might be in a "wait and watch" mode, or there might not be any significant news driving the share.


Consistency (small red and blue blocks)

If the daily traded value remains consistently close to the 20-day average, it suggests stability in the share's trading patterns. However, small red blocks signify that traded values for these shares are also higher than their respective averages.


Conclusion This heatmap provides a visual snapshot of the trading activity of the top 60 JSE shares relative to their average daily values. Traders and investors can use such visualisations to quickly identify shares with abnormal trading volumes, which might warrant further investigation or present potential trading opportunities.


In all the scenarios presented, it is crucial to consider other market indicators and conduct a comprehensive analysis before making investment decisions. External factors, such as macroeconomic conditions, industry trends, and geopolitical events, can also influence share price movements and trading volumes.



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