How does the historic summit between the United States and North Korea impact the importance of defense stocks in one's portfolio?

If you follow me, then you know that I have long been a fan of Raytheon (RTN) and Northrop Grumman (NOC) . My absolute favorite had been Raytheon, but of late that has morphed into Northrop, largely due to the approval of the acquisition of Orbital ATK, as well as the company's subsequently increased guidance.

Don't get me wrong. I still like Raytheon. I still like the Patriot missile. I still like the potential for "drone swarm Technology." I believe that to judge the major defense names, one must consider the entire time frame since the election of President Trump, as he has been a friend to the industry.

Let's explore.

In the chart above, one quickly sees the sudden improvement of late for NOC in the condition of the daily Moving Average Convergence Divergence (MACD), Relative Strength, and Money Flow. Fibonacci support showed up in early May precisely where it was supposed to, suggesting algorithmic control at the point of sale.

What I see is the convergence of a return to the April highs, and the central line of the Pitchfork just under the $360 level. I do not think that I am willing to experience another decline like the one we did see in early May, therefore I will increase my panic point to the 200-day simple moving average line from the $280 level where it was.

Before you ask, I am hanging onto my Lockheed Martin (LMT) position, I am hanging on to my Kratos Defense & Security (KTOS) holdings based on the potential for the drone swarm, and I have become somewhat less enamored with General Dynamics (GD) .

(Raytheon and Lockheed Martin are holdings in Action Alerts PLUS.)

Northrop Grumman (NOC)

Price Target: $358

Time Frame: Six Weeks.

Panic Point: $314 (up from $280)

Optional: The July 20 NOC 310 puts went out at $1.38 last night. If on weakness, we see that price approach $2 today, my thought is that at this point, these become attractive for a sale.

At the time of publication, Guilfoyle was long GD, KTOS, LMT, NOC, RTN equity.

Action Alerts PLUS, which Jim Cramer manages as a charitable trust, is long RTN and LMT.

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