It’s been a very tough slog for Chinese stocks so far in 2010. The country’s stock market is one of the worst performers of the year, and the heavy selling that took place from early April to late May really ramped up the fear of having any exposure to China. Yet, as we’ve seen so many times this year, when the fear reaches a tipping point, it’s usually the signal for buyers to step in.

This is exactly what’s happened in China of late, particularly in stocks that make up the iShares FTSE/Xinhua China 25 (FXI). This exchange-traded fund seeks investment results that correspond generally to the price and yield performance, before fees and expenses, of the FTSE/Xinhua China 25 Index. Basically, this index contains the top 25 stocks traded on the Shanghai Stock Exchange.

As you can see by the chart here of FXI, the fund now has breached its 200-day moving average, a clearly bullish signal indicating strong future upside potential.

My ETF Trader advisory service has used FXI in the past to profit from the frequent waves of buying in one of the world’s biggest and fastest-growing economies. This year, the China trade has been extremely volatile; however, I think the next round in China is going to be decidedly higher.

If you want to find out how we’re playing the latest China equity surge, then check out my ETF Trader advisory service today.