Oshkosh Corp. (NYSE:OSK) designs, manufactures and markets specialty vehicles such as defense trucks, access equipment, emergency vehicles and more.
In early July billionaire investor Carl Icahn disclosed that he holds a 9.5% stake in the company. As usual in such cases Icahn plans dialogues with management about increasing shareholder value. This would all be positive for the market, and it was perceived to be so for exactly one day but the stock is down almost 20% since the announcement. Furthermore, roughly 50% of the company’s sales go to the U.S. government, and with the recently announced spending cuts by the government this doesn’t bode well for Oshkosh Corp. (NYSE:OSK) , at least not in the medium term.
On the weekly chart of Oshkosh Corp. (NYSE:OSK) dating back three years note the series of lower highs and the major support zone (blue line) around $24.50. That very support level broke earlier this week.
On the daily chart dating back to January 2011 note the large gap down in late July and the oversold reading on the slow Stochastics indicator currently. Despite the longer-term weak trend from the weekly chart above it is now possible that the stock bounces some, possibly even into the gap area from late July. The trade I see setting up here is to start shorting the stock on any bounce to the $24-$25 area. First profit targets can be set near $20, followed by $18, with initial stops depending on where you enter the trade, no higher than $26.50.