UBS Moves to the Sidelines After GE Stock Surge

General Electric shares have rallied 62% since mid-December

UBS downgraded General Electric Company (NYSE:GE) stock to "neutral" from "buy," and dropped its price target to $11.50 from $13, saying it's "taking a breather after recent stock outperformance." The brokerage firm noted, however, that it "can start to look increasingly at the [company's] multi-year turnaround/transformation."

This follows GE stock's monster rally off its mid-December nine-year low at $6.40, up 62% through last Friday's close at $10.37. The equity's 120-day moving average has served as a springboard since a late-January bull gap, with its 40-day moving average more recently emerging as support. This trendline could be tested again today, with General Electric shares down 1% ahead of the bell, while further below here is the round $10 region.

This $10 level has been a popular target among options traders, with the July 10 put home to peak front-month open interest of more than 93,600 contracts. Data from the major options exchanges confirms a mix of buy- and sell-to-open activity since mid-April. Those buying the puts expect GE to breach the strike by expiration at the close this Friday, July 19, while those writing the puts think the equity will stay in double-digit territory through week's end.

More recently, it's been call buyers who have been unusually active on GE. At the International Securities Exchange (ISE), Cboe Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX), the equity's 10-day call/put volume ratio of 3.47 ranks in the 91st annual percentile, meaning calls have been bought to open over puts at an accelerated clip. The July 10.50 strike, in particular, has seen the biggest increase in call open interest over this two-week time frame.