China remains a short idea.

Public policies are interfering with markets reaching clearing prices, which are probably still much lower even after the recent pullback. YINN has fallen over 50% since I discussed that short; it has farther to fall.

Are there longs worth setting up against the YINN short? One stock that has pulled back over the past few weeks is Taomee (NYSE:TAOM). TAOM is an online and mobile children's entertainment company in China. Today it trades for slightly above book value.

This company has a legitimate management team. They have a substantial cash balance which derives from their IPO. Their CEO, Benson Haibing Wang, made an offer to take the company private for $3.588 per ADS.

Benson Haibing Wang

The downside is probably about $2.50, the upside is $3.59, and the probability of the upside is about 75%. That makes it quite attractive to own under $3.00. This one was a victim of indiscriminate selling and will probably recover in the months ahead.