Although much progress has been made on the physics of magic angle twisted bilayer graphene at integer fillings, little attention has been given to fractional fillings. Here we show that the three-peak structure of Wannier orbitals, dictated by the symmetry and topology of flat bands, facilitates the emergence of a novel state at commensurate fractional filling of $ u = n pm 1/3$. We dub this state a fractional correlated insulator. Specifically for the filling of $pm 1/3$ electrons per moir{e} unit cell, we show that short-range interactions alone imply an approximate extensive entropy due to the breathing degree of freedom of an irregular honeycomb lattice that emerges through defect lines. The leading further-range interaction lifts this degeneracy and selects a novel ferromagnetic nematic state that breaks AB/BA sublattice symmetry. The proposed fractional correlated insulating state might underlie the suppression of superconductivity at $ u = 2-1/3$ filling observed in arXiv:2004.04148. Further investigation of the proposed fractional correlated insulating state would open doors to new regimes of correlation effects in MATBG.