That change is likely to lead to changed behavior as producers start to pay more attention to marketing and managing their exposure to price risk. Draw a line connecting two price lows in a rising market or two price highs in a declining market, with the two points preferably at least 10 trading days apart. For More Details Purcell, Wayne D. Managing Price Risk in Ag Commodity Markets. Purcell, Wayne D. and Stephen R. Koontz. But, they can be accompanied by some difficult decision situations for the producer.
Some guidelines are in order.
Buy back short positions at the second close if there are two consecutive closes above the old high. The market is likely to go significantly higher because something in the supply-demand balance has turned more positive. There will be a distribution of sell orders at and just below the resistance plane, and the selling pressure will usually turn the market back at prices below the plane. Sell orders a bit below the plane have a higher probability of being filled. With this strong close, a cattle feeder probably would prefer not to be in short hedges.