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Friday, December 10th, 2004 | 2:50 PM

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ATI Technologies, Inc. (ATYT $19.60) is a world leader in the supply of graphics, video and multimedia products for desktop, workstation and notebook PCs, digital televisions, cell phones and game consoles. The company is considered a pioneer, innovator and market leader in the graphics industry. It is a high-ranked member in the Electronic-Semiconductor Manufacturing group, a group whose performance ranking of 63 out of 197 industry groups tracked by IBD represents a dramatic improvement of 123 notches over the past three months. Moreover, the company’s earnings have been on a tear with fourth quarter revenues vaulting 50% to $572.2 million. The catalyst stemmed from the success of ATI’s new PCI Express product line and strong demand in the company’s consumer products business. The company has sufficient ranks and a history of beating expectations. The seasonality nature of its business prevents the company from posting sequential accelerating results, as the second and third quarters often experience a lull.

What to Look For and What to Look Out For: The stock may be considered buyable under the CANSLIM guidelines, although deterioration below the $19 area on above average volume would be cause for concern. Any more serious declines, including a violation of its 50-day moving average, would be considered a technical sell signal. In addition, the recent slump in the semiconductor holders (SMH’s) should be monitored closely to see if this index of tech stocks keeps itself afloat above its 50-DMA. If the SMH’s crater under further selling pressure, it will be difficult for ATYT to swim against the tide. It offers an attractive risk/reward scenario, as ATYT is only trading less than 3% above the $19 mark and the bullish price/volume action has resulted in an impressive up/down volume ratio of 1.9. Please note that the company is slated to report earnings on December 21 before the market opens and has guided Wall Street to expect revenues in the $600 million to $640 million range, representing growth of 28% - 37%.

Technical Analysis: In mid-November, ATYT penetrated prior chart resistance at $18.90 en route to a move to the $20.50 area. Subsequently, the stock has been in a basing pattern above its 50 DMA, and in textbook fashion it has been able to garner buying interest on pullbacks as prior resistance has turned into pivotal support (green line) near the $19 level. On three of four recent dips down to the $19 area, the stock finished the sessions above the day’s mid-point, indicating pent up buying demand. Also, note that the most recent weakness has been accompanied by a fall-off in trading activity, indicating the contentment of institutional investors to hold onto their positions. Lastly, the upward trendline illustrates that the stock’s pullbacks have been contained and the uptrend remains firmly intact.