NEW YORK (Real Money) -- A few weeks ago, I wrote about three stocks that appeared headed for a fall -- Chipotle Mexican Grill (CMG), Monster Beverage (MNST) and Lululemon Athletica (LULU). Chipotle and Monster have done little since then, and both have continued to slide. Lululemon, on the other hand, reported strong earnings yesterday and shot higher, gaining nearly 11%. The company beat estimates on both earnings and revenue, and raised forecasts for the fiscal year.
I've been fielding a lot of questions about LULU, so I'll answer them here. Yes, I did recommend letting some shares go, but not the entire position, as per the last paragraph of the article linked above. Yes, I'm still holding some shares from my original recommendation at $48, for a gain of 42%.
The most important question is, "What happens next?"
Despite Tuesday's solid move, LULU isn't out of the woods yet. On the positive side, the stock gapped above its 50-day moving average (blue) and is trading above that indicator for the first time in nearly a month. LULU's relative strength index indicator (RSI) is rising (bottom of chart), but hasn't yet reached overbought levels. This tells us the stock still may have some room to run.
However, LULU needs to close above $70 to maneuver past a thicket of resistance. Since that obstacle is only about 2% away from yesterday's closing price, there is no point in opening new positions unless it clears that hurdle first.