Defense stocks, namely Northrop Grumman (NOC) , Lockheed Martin (LMT) , and Action Alerts Plus holding Raytheon (RTN) have experienced a major pullback.

All three are trading at or below the 200-day moving average. But, the fundamentals for defense remain strong. And if you have been looking for an opportunity to get into some defense names now may be your chance.

For more than a year now the moves in the defense sector have been strongly correlated with news related to North Korea. As tensions rose and rhetoric increased so did the defense stocks. As tensions eased, the stocks moved lower.

The hardline rhetoric between President Trump and North Korean leader Kim Jong Un helped defense stocks perform well in 2017, gaining over 30%, a move that was compounded by another 20% move in the first six weeks of 2018. Talks of normalizing ties with North Korea during the Korean Winter Olympics began to pressure the group.

On April 23, the Monday before the Inter-Korea Summit, defense stocks were trading at or near all-time highs. Leading up to the summit they experience their first major, North Korean denuclearization related decline.

The stocks attempted to regain their footing after the bout of selling, saw a small bounce and then proceeded to trade sideways before being hit again by further talks of denuclearization.

On June 11, the Monday before the Singapore Summit, the stocks once again came under pressure, moving quickly below the 200 day, a level they are currently trying to reclaim.

So the question is, are they simply broken stocks or are they broken companies?

Check out the video above for a few reasons you should remain bullish on defense and view this pullback as a buying opportunity.

For more in-depth analysis watch our interview with Zev Fima, a research analyst with ActionAlertsPLUS.com, as he tells us why Jim Cramer's Charitable Trust decided to go with Raytheon over other contractors in the sector.

And check out Real Money Pro for technical analysis of Raytheon and Lockheed Martin, with veteran analyst Bruce Kamich

Want exclusive investing insight from Jim Cramer? Get 24/7 access to Jim's charitable trust portfolio with a free trial to Action Alerts PLUS!

 

 

 

 

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