J. Crew beats projections -- but is the stock too high?

I've been completely wrong about this story. I said the stock was not in fashion when I wrote about the company's Q4 results. Looks like my opinion wasn't in fashion.

So now we come to the retailer's Q1 numbers, issued on Thursday after the bell. J. Crew earned $0.32 per share. That number includes charges related to severance and asset impairment that calculate out to $0.02 per share. Analysts were looking for only $0.11 per share. That explains why shares were up at one point during yesterday's after-hour session by well over 17%.

But I don't like other aspects of the earnings release. Gross margin took a significant dive. Same-store sales dropped by 5%. Earnings in last year's first quarter were $0.48 per share, which obviously means that the bottom line took a big hit. And I'm just not convinced that the fickle consumer can be trusted to keep the J. Crew story rolling along.

Still, if you think about it, you definitely do not want to fight the tape when it comes to J. Crew. Don't short the stock, certainly. As much as it pains me to say this since I've been so wrong so far, I just can't say go buy the stock on the assumption that you'll be able to sell it higher.

You just have to be patient. When it comes down, you can maybe try trading it with a tight stop. To be sure, management commentary in the release indicates that things may be getting better. Please put emphasis on the word may. If the markets get a shock to the system in the form of some very ugly data, stocks will plummet at a moment's notice.

I bet a lot of investors and/or traders are looking for excuses to close their profitable J. Crew positions. You want to be careful, because it's one heck of a lousy feeling to be the buyer of overvalued goods.

Disclosure: I don't own any company mentioned; positions can change without notice.