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Actually Google has over 10,000 ranking signals. (i meant 200 ranking signals * 50 variations which Google uses for each signal)You might need every thing from on-page optimization to back links for improving your search positions.You can't just ignore building the back links for your site.
I too had a situation like this. I had seen a fluctuation to move from 200 to 20 in a single day. Then the other day, the results come back around 200th position. people say it as the Google dance but it has not been for a while.