Can Amazon Continue?

Amazon Inc.

Amazon.com, Inc. (NASDAQ:AMZN) has had a stellar 2010, as shares soared from a low of $106 to a high of nearly $186.  Shares are currently treading just below that 52-week high at $181 and change.  Is it possible for Amazon.com to continue its breakneck pace in 2011?  At least one person says no, this stock is due for a pullback.

(SeekignAlpha) - Amazon (AMZN) – It’s a VaR Jungle Out There

This is another momentum stock from 2010, and talk about high expectations built into this stock, as AMZN has a lofty P/E Ratio of 74. Amazon is also finishing the year right at the top of its 52 week high at $182 a share.

I think the best argument for a pullback in this stock is to look at what happened last year. Amazon started 2009 at around $54 a share and finished 2009 at approximately $137 a share, a similar stellar liquidity driven year as 2010. Well, the stock pulled back dramatically at the start of 2010 going from the 52 week high area of $137 starting the year to the $116 a share level by February 8th.

Basically, a five week decline on pure profit taking after portfolio managers ran the stock up at the end of the preceding year, trying to maximize their numbers. I would expect a similar decline for the beginning of this year as well, maybe even some early sellers trying to beat the herd to the exits in the last week of the year .

Expect the pullback to test the $160 area, and if earnings disappoint in late January, expect a sharper correction to the $145 level as short sellers pile in on technical breakdowns pushing stocks lower than they ordinarily would drop on just profit taking alone. That`s the thing you have to remember about Wall Street, stocks usually go a lot lower or higher than you can ever imagine once a directional shift picks up momentum.

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