Okay bro, Idk your stats..like age, height or what not. I know wrestlers, like boxers need to maintain a certain weight, but keep that speed and strength. When your torking muscle off, it can lead into declined strength....maybe not your reason, but still. Also when losing weight in itself, it can cause strength losses. However, to answer your question, maybe its your training. I mean you can be muscular, but still be at 10% b/f. If you lift for bulk its 4-8 reps. However, for someone like you, who needs that agility, doing reps of 8-10 will help add muscle, but not overbulk you. For losing or toning reps of 12-15 are usually done. Now thats the weight training aspect. I think that may not be your problem though, as I am sure you know proper weight training.
So, it could be the lack of protein your are taking in. Also, even though you are losing weight, you can still get some carbs in. And if you find that too much, hit the treadmill to hit the carbs off. See if you are trying to lose weight and keep muscle and strength, it can be hard. It's sorts counter productive. Thats why after weigh ins ppl carn load before matches. Also body builders in magazines, dont look ripped like they do all year round. It would be insane for then to be at 6% b/f all year round while training to add muscle. I think see how much portein ur getting. For 120lbs, get about 60-70 g of it a day.Some might suggest a little more protein. And dont rely on protein shakes either. Eat fish, chicken, turkey,and small amounts of tuna( too much can mess with ya if ur sensitive ). You can have beef, just limit it. Also whole wheat pasta( watch though cause pasta has alot of cals ) even has protein. Yogurt has protein.You also want to eat eat all natural goods foods. Stay away from MSG, like taco bell for protein fuel. Metabolism and adjusting it can help, but it seems since you can lose weight okay, your metab might be okay. What I mean is that your metabolism may not be slow. Also eating smaller portion meals just more frequent, like 4-5, can be good causese your providing your body with steady amounts of protein throughout the day. If you cant eat 4-5 meals, then just maybe 3 and light snacks that are good for you,just make sure your eating good when you do eat.If your workout regiment is good, you should be able to take in some okay amounts of carbs and cals and still keep shape. So, if your workouts are good, then its probably the protein intake for loss of muscle. Also, you could be overtraining in the gym! This is a rookie mistake. People think that if they workout all alot it will make them bigger, not if your over training. Here is a sample workout:
Day 1
Bench press
Dips
Tricep pushes
Day 2
Bent over rows
Lat pull downs/ upright rows/or chin ups...
Bicep curls
Day 3
Squats/ or deadlifts
Leg extensions/ or presses
Calve raises
See you dont need to work out 7 days a week. Reason, your doing compound movements. For instance, rows are a back exercise, but they hit your Biceps, shoulders, and traps also. Bench press hits your chest, but also hits your triceps and shoulders. So what I am saying is, you dont need to do Bicep curls, concentration curls, preacher curls, ands hammer curls for biceps. For some people, especially small people, thats too much. Also people make the mistake of training every muscle group twice a week, in some, thats overtraining. Most people just do it once a week.
Now what I said doesnt apply to everyone. Some people can take more training than others. Also, some people need to intake more or less than others. However, most likely your problem is in one of those areas, either your protein or training. The workout I gave you was an example workout. It has compunds in there and some minor isolations. Some people like to do more or even less than what I gave an example of.