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Data Breach Pushing Google Into Bear Market Territory

Data Breach Pushing Google Into Bear Market Territory

After the events of the past week, we can officially retire Alphabet Inc.’s (Nasdaq: GOOGL) official motto: “Do the right thing.” In fact, by covering up a massive data breach at Google+, Alphabet is now the exact antithesis of its original motto: “Don’t be evil.”

What’s more, the fallout comes at a bad time for GOOGL stock.

On Monday, Alphabet announced that a data breach at its Google+ social network exposed the private data of hundreds of thousands of users. The breach allowed access to Google+ profile data between 2015 and March 2018, when Alphabet finally found and fixed the hole.

But instead of announcing the security issue back in March, Alphabet decided to hide the breach out of regulatory fears. An internal memo compared the potential consequences to the fallout from Facebook’s Cambridge Analytica debacle.

As part of the announcement on the data breach, Alphabet is closing Google+. While the social media platform was far from popular, it becomes yet another failed venture from Alphabet, alongside Picasa and Google Glass.

For GOOGL stock investors, this news undermines confidence in the shares at just the wrong time. FAANG stocks were already struggling with broad-market selling pressure. Momentum among tech stocks was sapped last week amid a considerable shift toward bonds and away from a top-heavy equities market.

As a result, GOOGL stock has breached former support at its 50-day moving average and psychological support at $1,160. The latter support level provided a floor for GOOGL stock throughout most of September. This area could now provide technical resistance.

But the big worry for GOOGL stock investors is the 200-day moving average. This trendline is typically considered the demarcation line between a bull and bear market for stocks. GOOGL shares threatened this bull/bear line on Monday as selling pressure gained momentum from the Google+ data breach.

This week could offer up signals as to where GOOGL stock heads next. Alphabet is holding a hardware event today, with reveals expected on the new Pixel 3 and Pixel 3 XL smartphones. This is no iPhone event, but sentiment coming out of the unveiling could make or break GOOGL stock over the short-term.