WTI crude technical analysis: how will prices react to tomorrows EIA inventories report?

Tonight’s industry-backed API crude inventory report showed US domestic crude stocks increased a staggering 8.97 million barrels, way above the estimate of a 0.5 million rise predicted by a Bloomberg survey.  Following the announcement, WTI prices declined by approximately $0.5, although had risen by nearly $0.8 in the two hours before the announcement. With tomorrow’s EIA report likely to show a similar rise in stocks, and markets trading down today due to the Bank of Japan refraining from adding additional stimulus, do the technical support the view that crude could fall further?

On the daily chart below we have three indicators shown; Bollinger bands, the MACD and the William %R. At the moment neither the MACD or William %R have cross into selling territory, as we would expect the green MACD line to cross the red signal line or the zero line and the W%R to cross below -50. As we can see from the latest candlestick on the daily chart, the reason for these both remaining some strength is that the WTI crude price rebounded from its earlier low of $94 to its current level of $94.86. Given the rebound happened before the much higher than expected rise in inventories, we can gather some clues from the higher frequency charts as to whether the price may decline further tomorrow.

On the 30-minute chart below, the same three indicators show that crude is also testing its 30 minute middle-Bollinger band (the 20-day MA), the MACD lines are in a similar place to the daily chart and while the W%R has already crossed below the -50 mark.

With both charts testing typical support areas, the MACDs approaching a potential cross-over selling signal and the W%R of the higher frequency already giving a sell signal, signs are strong that WTI has the potential to carry on falling further if economic sentiment remains bearish tomorrow. However, traders looking to go short should wait until a full set of signals are received. On the higher frequency charts, resistance areas can be seen at around $94.5-94.4. If this boundary is breached, we should expect to see WTI fall to the $94 boundary, which marks both the 20 and 200 day MA.