re MM's a rather lengthy read but hopefully you will glean from it and i'm not attempting to be glib......
There are often circumstances that allow an MM so inclined, to try and induce certain movements in the markets they keep. Just like we see opportunities in the markets we play, they have opportunities also. When the situation allows, they will attempt to make certain "plays".
One is called a "shakeout". A shakeout usually occurs after a stock has had a meteoric rise. MMs may have either sold short on the way up and at the run's peaks and/or sold naked shorts. This situation creates a large demand amongst one or more MMs to buy shares, preferably at a low price...the shakeout begins. It usually starts with one or two MMs that try to "walk" the price down by stomping on an ask price.
By stomping on an ask price I mean the MMs will take the best ask position (offering the stock at the lowest price) and even in the face of heavy BUYING, they won't move the ask up, in fact many times they lower their ask right in the face of heavy buying! Would you lower YOUR selling price in the face of high demand? I wouldn't.
But to the MM playing this game, it doesn't matter. Its just a cost of doing business to them. Suppose an MM has little or no inventory in the stock and the huge demand caught them off guard, they "sold some shares short" at various levels using virtual inventory (shares they didn't have in customer inventory). They have three days to settle so they need to buy back some shares to cover their naked short sells or be subject to punitive action, hopefully for them they can pick them up very cheaply and make a lot of money.
One way to do this is to induce a shakeout. Keep in mind, stocks that have had huge mega runs in just a few days tend to have a lot of "non-investor" types such as daytraders, momentum traders, position players etc. in them. These types are "weak" shareholders, that won't hesitate to sell, sometimes at the slightest indication of a slowdown or on a profit taking dip. By stomping on the ask and walking it down by lowering their selling price, they also drive the bid down. In the most blatant cases , you'll often see the ask lines cross red over the bid lines on level II real time as the manipulator lowers his selling price to levels even lower than what people have been eagerly bidding for it! It usually isn't long before the weakest hands start to join in the selling thinking that the party is over. This in turn induces more selling and in the best cases for MMs, "panic selling" occurs. The price plunges to support levels which is an indication of how many longs, and investors are in a stock. The MMs are usually aware when the market bottoms out.
Sometimes an MM or two tries to go lower but if there is adequate support, the stock will cease declining and quickly move back up as shorts are covered, inventories replenished and longs and daytraders buy more or buy back. Depending on several factors it may or may not rise back to and beyond the daily high. If it does, that is very bullish short term.
Either way the MMs made out big time. Those that were shorting at the top covered and made mad cash, the others that didn't actively "play" the game just let it happened and made mad cash on the spread over the volume created by the activity. From a T/A standpoint, after a shakeout, where the levels of support and resistance are established is the best indication of where the stock may go next.
sincerely hope this helps
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"We are what we repeatedly do. Excellence, therefore, is not an act, but a habit." - Aristotle
