Your first answer, "Have you seen the new magazine that I was reading this morning?" is correct! This is because you were reading it in the past. If you were to say, "Have you seen the new magazine that I am reading?" then that would be in the present. It is incorrect to say "I reading", though. You can say, "Have you seen the new magazine that I read this morning?"

The first one is right. I think.I reading is wrong.haha

First is better. The "was" is required. Reading in this sentence is a participle and it needs the auxiliary verb.

your 1st answer.