Magellan Midstream Partners, L.P. (NYSE: MMP)

Magellan Midstream Partners, L.P. engages in the transportation, storage, and distribution of refined petroleum products and crude oil in the United States. It operates in three segments: Refined Products, Crude Oil, and Marine Storage. The company operates refined products pipeline that transports gasoline, distillates, aviation fuels, and liquefied petroleum gases for independent and integrated oil companies, wholesalers, retailers, traders, railroads, airlines, and regional farm cooperatives; leases pipeline and storage tank capacity to shippers; and provides services, including terminalling, ethanol and biodiesel loading and unloading, additive injection, custom blending, laboratory testing, and data services.

Take a look at the 1-year chart of Magellan (NYSE: MMP) below with added notations:

1-year chart of Magellan (NYSE: MMP)

After declining from May until September, MMP started trading sideways over the following 3 months. While in the sideways move, the stock formed a clear resistance at $70 (red) and a solid $55 support (green). At some point, the stock will have to break out of the current trading range.

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The Tale of the Tape: MMP is trading within a large sideways range. The possible long positions on the stock would be either on a pullback to $55 or on a breakout above $70. The ideal short opportunity would be on a break below $55.

Before making any trading decision, decide which side of the trade you believe gives you the highest probability of success. Do you prefer the short side of the market, long side, or do you want to be in the market at all? If you haven’t thought about it, review the overall indices themselves. For example, take a look at the S&P 500. Is it trending higher or lower? Has it recently broken through a key resistance or support level? Making these decisions ahead of time will help you decide which side of the trade you believe gives you the best opportunities.

No matter what your strategy or when you decide to enter, always remember to use protective stops and you’ll be around for the next trade. Capital preservation is always key!

Good luck!

Christian Tharp, CMT

Follow me on Twitter: @cmtstockcoach