Controlling about 45 million ounces in proved and provable gold reserves, Vancouver-based Goldcorp (TSX: T.G, Stock Forum)/(NYSE: GG, Stock Forum) ranks among the top five gold companies in the world. So far in 2008, it has paid to bet on the gold sector, with the Gold Bugs Index (AMEX: HUI, Stock Forum) rallying more than 10% since the beginning of the year, compared to the S&P 500 Index's (SPX) loss of more than 15% and the Toronto Stock Exchange's (TSX) basically flat performance.

But Goldcorp has outperformed even the stellar returns in the gold sector as a whole, advancing more than 50% since January. During this time frame, GG has enjoyed the solid support of its 10-week and 20-week moving average, and is now poised to challenge overhead resistance at the round-number 50 level. The shares experienced a pullback on Tuesday, as the TSX sold off due to financial concerns stemming from the U.S. market. But short-term support in the 48 region helped to mitigate those losses.

However, in an article on Thompson Financial, Ian Nakamoto, director of research at MacDougall, MacDougall & MacTier, was quoted as saying, "When people get nervous it's easier to sell first and ask questions later." Such a knee-jerk reaction in the gold sector could provide an excellent entry point for a long position on GG, as gold is often utilized as a hedge against financial troubles and inflation.

In the options pits, speculators are biting hard on the short-term, knee-jerk reactions in the financial media. Specifically, GG's Schaeffer's put/call open interest ratio (SOIR) of 1.40 indicates that puts easily outnumber calls among near-term options. Furthermore, this ratio ranks above all other such readings taken during the past year, indicating that options players have not been more pessimistic toward GG during the prior 52 weeks. 

Looking at the equity's open interest configuration reveals that very few investors are looking for GG to extend its year-to-date rally. Peak put open interest totals nearly 30,000 contracts at the deep out-of-the money 40 strike for the July and August series of options. Meanwhile, peak call open interest rests at the in-the-money 45 strike, totaling roughly 15,500 contracts. 

There is some turbulence at the 50 level, with some 12,000 calls residing in at this strike in the July series. But with July options expiring at the end of the week, and fewer than 3,000 calls open at the 50 level in the August series of options, the path higher becomes less cluttered for GG on the options front.

Finally, Wall Street offers up a bit of concern from a contrarian perspective. According to Zacks.com, eight of the 12 analysts following GG rate the shares a "buy" or better. However, the risk of downgrades from this bullish bunch is thin, given the stock's strong technical performance and the continued advance in gold prices.

The bottom line for Goldcorp is that the stock remains in fine technical standing, with short-term support in the 48 region and a strong long-term uptrend to help usher the shares steadily higher. Meanwhile, the expiration of overhead call open interest, should make the path higher much easier for GG in the coming weeks. Bullish investors should look for a solid breakout above the 50 level as a sign that this bull run is far from running out of steam. 

By Joseph Hargett

See More Articles by Joseph Hargett of SchaeffersResearch.com

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