What characteristic does the Levy method use for analyzing relative strength?

The Levy method, which is a technique used in technical analysis to assess the relative strength of a stock, employs the ratio of the stock price to its 131-day moving average. This characteristic allows analysts to gauge how the stock is performing relative to its own historical price movement. By using a longer-term moving average, the method accounts for broader trends and smooths out short-term volatility, providing insight into whether a stock is currently in a stronger or weaker position compared to its average performance over that time frame.

This approach highlights the importance of relative strength in identifying potential buying or selling opportunities, as stocks that are trading significantly above their moving average can indicate bullish momentum, while those below may suggest bearish conditions. Using the ratio to the 131-day moving average effectively captures the essence of trend-following strategies, making it a pivotal aspect of the Levy method.