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With the tremendous amount of margin debt and QE in the system, traders, money managers, and investors are leveraged to the hilt and are betting all their chips on a rally in CRM and NFLX. Until this risk-taking party is over (most likely at the end of QE in June) investors should use large sell offs to add long exposure (ie. buy dips and sell rips). The snapback rallies which are driven by short covering, bank buying, etc... are quite violent and with the current sell off bringing in an oversold RSI, MACD, and stochastic, investors should look for oversold stocks to buy for a bounce and sell into the rips. The gap down in the markets on Monday will likely be filled at some point in the near future. Here are ten candidates for buying on a dead cat bounce. Trade on market declines until QE is out of the system.

Oracle (NYSE:ORCL)
: Enterprise software, middleware, hardware, Java, cloud computing, etc. Oracle trades for a forward PE of 13.8X and an EV/EBITDA of 11.6X. ORCL grew earnings at 38% while profit growth was over 75% on a quarterly YOY basis. ORCL is oversold with an RSI of around 30. The company has little in the way of tangible book value per share and has issues some stock over the past year, however given their strong competitive position in cloud computing, I see this as a good name to own for an oversold bounce and/or longer term holding.

JA Solar (JASO): A bit more speculative being that the company is Chinese, operates in a hated industry which has an uncertain medium term future. However, JASO is dirt cheap at current prices and is trading for under 4X earnings and for a discount to tangible book value with a price to book value of .81X. JASO shares are cheap on operating cash flow with an EV/EBITDA ratio of only 2.5X although little free cash flow has worried analysts even though they have plowed that cash back into capital expenditures to fuel growth. A dividend would send the shorts scattering, but even without one JASO shares could bounce substantially higher given the stocks RSI of just 28 or so and the steep decline in share price over the past month.

LDK Solar (NYSE:LDK)
: Like JASO, LDK shares have been badly bruised recently, with the stock now selling for under 3X trailing earnings. LDK has been repurchasing shares and the company trades for a small discount to book value. The stock is down nearly 50% since the start of May, and I feel that LDK shares may be a good buy for a 10-20% move higher in a short period of time. Given the stock's dirt cheap valuation, the risk to longs seems much lower than the risk for the newly opened short positions in the name, with LDK short interest at around 10% of market cap. I think the shorts are incredibly lucky in JASO and LDK and should cover as soon as possible in these shares. I will be looking to add a position this week for an oversold bounce and will likely use a fairly tight stop loss order.

Intel (NASDAQ:INTC)
-- Intel shares are still much higher than they were before releasing strong Q1 earnings, but the stock is well off its recent highs. INTC shares are trading for only 10.5X earnings and 9.5X forward earnings with a price to operating cash flow multiple of around 8X. INTC has grown earnings and revenues at over a 24% clip YOY and the stock is undervalued on growth and cash flows in my view. Investors looking to add a position for a shorter term trade can use $22.60 or so as a stop loss level as shares have had support at this price over the past year. RSI on Intel is around 40, so although it's not too oversold here, the shares could pop higher from these levels based on earnings, undervaluation, and momentum.

Microsoft (NASDAQ:MSFT)
-- Microsoft has not really recovered since offering $8 billion for Skype but the stock is dirt cheap at 9.6X trailing earnings and just 8.7X forward earnings. MSFT is down from a around $29 a share in January to just $24 today and the stock is currently very oversold on a TA basis. RSI on MSFT is around 15 for MSFT suggesting that the stock is due for a 5-10% snapback rally in the next week or two. I will be adding exposure to MSFT via in the money call options and short January 2012 puts for a longer term options investment.
Disclosure: I am long JASO, MSFT.

Additional disclosure: I may add long positions these stocks in the next few days

Source: 5 Undervalued and Oversold Bounce Candidates