Isn't it interesting that tons of shorts are suddenly back. Think about it, there is no change in the company, its competitive position, or new news of any sort. Yet suddenly all these shorts appear apparently out of nowhere.
I agree with JDHowerd2...it does look like somebody wants to drive the price down in order to get in at a lower price. Probably the MMs trying to exploit the little guys again.
There are numerous ways they can manipulate the stock price of companies with small floats, and it can be very dramatic on low volume days. They can sell short, sell their long positions, as you stated (the theory is once they get the downward momentum going, others [generally small "weak handed" investors] will sell, and the process snowballs). Also, they can put out a very large order at a significantly lower price than offering which causes downward movement. They can then cancel order before it is filled, or when it is only partially filled. There are probably several other ways as well.