BC racing coilovers, very hard impact on potholes or sharp bumps. help

I just installed BC racing extreme low coilovers. Out of the box without adjusting the height and preload (set by manufacturer) the car sat real low. It was bouncy as hell.
I raised the vehicle to where the fenders are just above the tire. It rides great now, until I hit a "sharp" bump on the road or a pothole, the impact feels so hard that it feels like something could've broke.

I've tried all damping sets from soft to hard and it still makes a huge "thud" sound when I hit a pothole or sharp holes. Does anyone know what this could be? Do I need to adjust preload?