Although we don't believe in timing the market or panicking over market movements, we do like to keep an eye on big changes -- just in case they're material to our investing thesis.

What: Shares of Chinese advertising specialist China MediaExpress (Nasdaq: CCME) rallied 19% in intraday trading Friday after denying recent allegations of fraud and announcing its December 2010 contract with Eading Group, one of Apple's official ad distributors in China.

So what: Unfortunately for management, its release late Thursday hasn't completely undone the damage caused by the string of negative reports from Citron, Bronte Capital, and, most recently, from the Rino International-exposing Muddy Waters. Even with today's big bounce, the shares are down more than 35% over the past five trading days on surging volume.

Now what: Management said it would issue a more detailed response in the next few days, but I'd prefer to stay permanently on the sidelines. While China MediaExpress's forward P/E of 4.5 is tempting, there's just too much risk surrounding the business and reverse-mergers, as a whole, for average Fools to mess around with. Of course, for less risk-averse investors willing to do a lot of homework, you'll be hard-pressed to find a more potentially explosive situation.

Interested in more info on China MediaExpress? Add it to your watchlist.

Fool contributor Brian Pacampara owns no position in any of the companies mentioned. Apple is a Motley Fool Stock Advisor recommendation. The Fool has written puts on and owns shares of Apple. Try any of our Foolish newsletter services free for 30 days.

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