Editor's Note:

The S&P 500 has rallied to 951 and marked a new closing high for the year. Is this the breakout over 950 many are looking for? I doubt it. The S&P 500 index struggled with 950 for several days in a row. This could be a bull trap after a massive 8% rally in six days time. If you're looking for a breakout I'd wait for the S&P 500 to close over 960. Unfortunately, we're in a predicament when it comes to new plays. Do we launch bearish positions now with the S&P 500 testing resistance? We could but there really hasn't been any sign that the rally is slowing down. At the same time do we launch new bullish positions with the S&P 500 testing resistance and looking very extended and due for a correction? That doesn't sound like a smart play either. The only play that might work with the S&P 500 at such a pivotal level would be some sort of neutral straddle or strangle but if you look at a daily chart of the S&P 500 it's been going sideways for three months. Straddles or strangles might not be the best trade either.

Thus I'm not suggesting new positions on OptionInvestor at this time. However, two stocks I'm watching are AAPL and PKX. Apple Inc. (AAPL) is due to report earnings after the closing bell Tuesday night. There is always a chance for profit taking on the earnings results. I would wait and hope for a decline following its announcement. We can use a dip in the $143.00-140.00 zone as a new bullish entry point and consider a stop loss under the 40 or 50-dma. PKX is a south Korean steel maker and shares have broken out from a multi-week consolidation. Look for a correction toward the $88.00-87.00 zone as a potential entry point to buy calls.