POT chart pattern

Potash Corp. Saskatchewan (NYSE:POT) is a nice example of a reverse head and shoulders. Notice that price has already cleared the neckline, which is necessary for the pattern to be valid. Often, price will throw back to test the neckline breakout and usually offers the highest risk/reward entry.

While most reverse head-and-shoulders patterns have a downward slant to them, it is important to note they could also be horizontal or even slant slightly upward. Again, the more important factor is to watch price action.