The world’s most-watched earnings announcement is slated for after the close today — buckle up.

Apple (AAPL) will report its fiscal third-quarter results, and hopefully shed some light on a growing concern — are iPads and iPhones losing their competitive edge in an increasingly-competitive tablet and smartphone market?

At last look, the pros are looking for income of $7.31 per share, off from the year-ago figure of $9.32. Forecasters expect the top line to remain flat, right around $35.0 billion. Such results would imply year-over-year margins will contract because Apple has shifted from a premium product toward a value-driven product base.

Remember, the third-generation iPad was launched in March of last year, which not only added retina display to the device’s bragging rights, but also added LTE connectivity. Consumers went wild for it. Sales of the then-newest iPhone 4, released in October 2011, were still going relatively strong in Q2 of 2012 as well, making for a very good quarter.

The buzz can’t last forever, though — and it sure didn’t for Apple.

The iPhone 5’s sales seem to have been concentrated in the period just after its September 2012 launch. Ditto for the fourth-generation iPad and the iPad Mini, both of which were released in the fourth quarter of last year. While the latest iPhone is still a premium product, Apple is finding it has to spend more on the underlying technology to keep the iPhone as the top option within the smartphone arena. But it hasn’t been able to fully pass those higher costs on to consumers, who now have access to a variety of very capable smartphones at lower price points.

The tablet market is more competitive too, forcing Apple to spend more on its fourth-generation iPad, but not necessarily giving the company the ability to charge more for it.

And the iPad Mini? It was never even designed to be a wide-margin product; the low price point was largely the point. That’s why the bottom line is slumping even if the top line isn’t.

Those are just some of the things to bear in mind (and read between the lines for) when the numbers are released later today. In the meantime, the chart is the story, since it may well be telegraphing what traders are thinking — and planning to do — when the numbers are unveiled.

Not that it matters for very long.

Little More Than a Coin Toss

Based strictly on the stock’s very recent bearish action, traders aren’t expecting particularly encouraging news from the company. Shares of AAPL have peeled back from last week’s high around $434 to the current price of $423, and the bearish undertow is still in place. Don’t sweat it too much, however.

Click to EnlargeThe market was betting against Apple right up into last quarter’s earnings announcement too. When the company beat estimates, the stock bounced back sharply, from $388 to $466 in just a couple of weeks. It wasn’t the first time the market’s been wrong about the post-earnings response either.

The chart at right tells the tale. The blue “up” arrows mark the earnings release dates that Apple topped estimates. The red “down” arrows highlight Apple earnings shortfalls. Traders guessed wrong on two of the three misses, running the stock higher right into the announcement (the third miss in October of last year is a statistical outlier anyway). Of the eight beats we’ve seen since late 2010, the market was only bidding the stock up in advance of the news in three of those cases; AAPL shares were headed lower before the other five beats were released. Even then, only two of the eleven post-earnings announcement moves meaningfully followed through on the immediate knee-jerk response to the news (January 2012 and October 2012). Eight of the other nine post-announcement moves reversed course less than a few weeks later … and within just a few days in many cases.

When you take a step back, one thing becomes clear: If you’re betting on Apple earnings, not only might you be as well off in Vegas, you may actually be better off in Vegas, where at least the rules are clear.

Don’t Play the Game, But Know a Game is Being Played

So how does one get into our out of an Apple position? Above all else, recognize that this stock’s massive following is going to make it swing wildly every few days. That’s about how long the herd mentality surrounding AAPL lasts. You can use that fairly predictable volatility to your advantage, however, no matter what your preferred timeframe is. You just have to figure out where the chart’s organic ceilings and floors are, and act accordingly.

Click to EnlargeAAPL is having a tough time dealing with resistance around $432, where the 50-day and the 100-day moving average lines have converged; both have a tendency to act as support and resistance. Until shares can clear that hurdle, even encouraging Apple earnings news won’t matter. Once the barrier at $432 is broken, though, odds are good Apple shares will roll all the way up to the $467 area, where it will be tested by a previous key horizontal ceiling. If that ceiling is broken … well, look out above.

At the other end of the chart is a floor at $388. If AAPL does happen to pull back, that support line should hold, and act as an optimal entry point for a longer-term bullish trade. Just wait to make sure that floor is going to be used as a springboard.

Whatever the case, unless you’re a true daytrader, the best way to play today’s announcement from Apple may be to just sit back and let everyone else fight a confusing battle, and then come in a few days from now and make a smart-money move.

At the time of publication, Brumley did not have a position in Apple.