Previous highs followed by dramatic lows

China's stock market continues to surge, sending the Shanghai Composite Index to a three-year high and extending its gain during the past month to 22 percent amid record trading.

A look at eight previous occasions during the past decade when shares climbed this much, however, suggests short-term caution: the Shanghai Composite dropped an average 3.3 percent during the following month, with the gauge falling seven times.

The outlook was more optimistic for investors with a longer-term horizon, as the index climbed 6 percent over the next three months on average.

Here's what drove the past rallies and what the Shanghai Composite did in the aftermath:

· October 2010－The index jumped 15 percent over 10 days as the government pledged to boost household incomes and industries such as technology as part of its five-year plan, while economic indicators showed stronger growth. Next one-month return: -3.8 percent. Three-month: -11 percent.

· February 2009－Stocks gained 17 percent as falling inflation fueled speculation of central bank stimulus and government efforts to support the property market. Next one-month return: -4.4 percent. Three-month: +15 percent.

· November 2008－The Shanghai Composite Index climbed 18 percent as China announced a more than $580 billion stimulus package to revive economic growth amid the global financial crisis. Next one-month return: -2.6 percent. Three-month: +8.7 percent.

· May 2008－The gauge advanced 17 percent as the nation's biggest banks reported improving earnings and the government cut the tax on equity trading. Next one-month return: -10 percent. Three-month: -28 percent.

· May to July 2007－Volatility in China's stock market surged as a flood of new investors in shares countered concerns that the government would tighten monetary policy to curb inflation. Next one-month return after May rally: -1 percent. Three-month: +17 percent.

· February 2007－The Shanghai Composite rallied 16 percent, recovering from losses triggered by reports of a government clampdown on stock-market loans. Banks climbed on rising earnings. Next one-month return: +4 percent. Three-month: +21 percent.

· December 2006－The gauge climbed 18 percent as China's surging economic growth spurred strategists to predict further gains in 2007 while Chinese lawmakers discussed a proposal to cut corporate tax rates. Next one-month return: Little changed. Three-month: +31 percent.

· May 2006－Stocks jumped 18 percent, led by commodity producers, as copper prices surged to records on signs of buoyant global growth. Next one-month return: -8 percent. Three-month: -5.6 percent.