A large drop in a short time frame is a result of large sell order. (See the spike in volume bar) The variation of this move is a price drop over a period of a few hours...
The psychololgical reasoning behind such moves is to 'shake off' weaker hands or those with close stop loss levels, with a view to buy/accumulate the stock at a cheaper price.
Many times you can notice this in an EOD candle. After a 2-3 days of small upmoves, one day there is a big green candle. The next day, the stock will open high, and move higher. Those reading chart, will have a bullish view on the stock and would buy on higher high/gap up (at open) or on seeing the stock move higher after open. Then by mid-day the stock will start to move down, and give up today's upmove as well as that of the previous day. The stock will touch the previous day low, where most of the new buyers will sell out.
Smart money now gets the opportunity to buy the stock at low price when the stop losses get triggered.
Placing a buy at the close of the previous day candle low is a good strategy, or to be patient and wait for a retracement of an upmove.
Also, this would mean that the Stop Loss has to be placed well below the psychological level where it can be triggered.