Magellan Midstream Partners (MMP) looks poised to make a third leg to the upside in the next few months. MMP made a low around the election and soared higher over the next three months. Prices made a small double top around $82 and have corrected the past two months.
Beneath the surface, the decline has slowed and volume suggest that investors have stayed long. Let's drill down further to make our bullish case.
In this daily chart of MMP, above, we can see that prices made their small double top near $82 in January and February. MMP moved lower into late March, but notice how the 12-day momentum study (lower panel) made a higher low as prices moved down. The higher low is a bullish divergence and tells us that the rate of price decline slowed as $76 was approached.
Now, look at how steady the On-Balance-Volume (OBV) has acted the past two months. Investors have largely stayed with their long positions, rather than liquidate or aggressively sell. While MMP is below the rising 50-day moving average line, it may soon close above it.
In this weekly chart of MMP, above, we can see that prices are above the rising 40-week moving average line. If you stand back a little from the chart, you should see that prices have made two advances or "legs" since early 2016. A third leg higher looks like it is about to get underway.
The weekly OBV line has been moving higher since December and tells us that investors are accumulating shares. The weekly Moving Average Convergence Divergence (MACD) oscillator has been above the zero line for most of the past year, which is bullish.
In this Point and Figure chart of MMP, we can see that prices have been correcting to the downside (column of Os). Support looks like it is nearby and a rally to $82.68 would open up the possible upside price target of $101.76. Not bad for a third leg higher.
Bottom line: aggressive traders could go long MMP on a close above $78.50 and add on strength above $80 and $82. I would risk a close below $75 and target the $101 area on the upside.
(What will move markets this quarter and how should investors position themselves ahead of time? Jim Cramer sat down with four of TheStreet's top columnists recently to get their views. Click here to listen to his latest Trading Strategies roundtable with them and read their advice for stocks, bonds, forex and gold.)