12:30pm (EST)

Shares of Apple (AAPL, $658.47, down $0.92) are trying to push green today but have been in a downtrend since hitting a high of $705 on September 21.  We mentioned in late August when shares kissed a low of $650 that support should hold and shares could push $700 on the iPhone5 news. 

The talking heads will tell you there was no rally before the announcement but as we mentioned when shares tripped $700, they were already up $40 when the pros were looking for the typical product announcement move. 

We also said shares of Apple could pull back with the overall market after hitting new highs and we were looking for $675 to hold.  When it didn’t, we thought shares could test $650 again.  Apple closed below $675 on September 25 and reached a low of $656.50 yesterday. 

The reason we are going through this is because we want to show you a possible trade setup.  It is not often we do this but as we are rewriting our option trading manual “How to Trade Options on Momentum Stocks”, we thought we would share some of our ways we look at trading options.

With Apple near $650 again, there is a chance shares could test $625 or even $600 on further weakness but it will take some bad news for this to happen, or an overall market pullback.  The company will announce earnings on Monday, October 15, so perhaps they could miss Wall Street’s estimates which has happened over the past year.  However, they could also beat estimates and if we had to bet a $50 on it, we would say they beat earnings.

We would rather stay away from the earnings announcement because the options are expensive to play and earnings plays are never a sure bet.  This means we could play weekly options on Apple or the regular monthly options on a short-term rebound off support.  We often say technical chart work trumps news but pending news or rumors do play a role in a stock’s movement. 

So, besides earnings, what would be a catalyst besides support that could give shares a pop?  Well, how about the announcement of the iPad “mini”.  Many of the Apple know-it-alls said the company would announce the mini with the iPhone5 but said there was a chance they could announce the new device in October. 

The water cooler talk is Apple will indeed announce a new iPad and could send out event invitations on October 10.  With shares near support and the pending news, we decided to profile some call options but they will not be official recommendations because we are still unsure on what direction this market (and Apple) will break in October.

Since $675 was prior support, and shares did reach $700, we decided to look at the first level of resistance and focused on the 675 call strike prices.  The WEEKLY October 675 calls (AAPL121005C00675000, $1.90, down $0.85) would be no good to us as they expire this Friday.  Strike one.

The October 675 (AAPL121020C00675000, $9.90, down $1.50) have a little over 2 weeks before they expire but they are expensive.  A 10 contract trade would cost $10,000 which makes us uncomfortable as we like to keep our trades at $1,000-$2,000 per position.  Shares would also have to trip $685 for us to technically breakeven so we don’t like these calls at the moment either.  Strike two. 

We could wait until next Tuesday (market is closed Monday) for the new Weekly calls to list and perhaps, the regular monthly Apple options will get cheaper to where we can swing the bat.  Of course, if there is no announcement and shares fail to hold $650, we will look at put options.

With two strikes against the trade already, it is unlikely we do a call options trade on Apple but we haven’t given up hope and will keep the stock on our Watch List.

As far as the market, it has been another choppy day with both the bulls and bears getting a little of the action.  Although the first half favored the bulls, the bears are taking control as we head into the second half of trading.

The Dow is down 56 points to 13,458 while the S&P 500 is lower by 2 points  to 1,442.  The Nasdaq is off by 2 points to 3,111.

We have a ton to cover with our current trades so let’s get on it.  Subscribers, check the Members Area for the updates.