Ranking Fluctuations
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This probably has at least something to do with it. What does your anchor text profile look like?
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You should consider using the disavow tool, when needed, but only after the a very thorough back-link analysis. This tool can be used for good

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It's actually not bad, here's a snapshot of the anchor text: http://awesomescreenshot.com/01f1k00j2f
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Can you please share the website URL and both the keywords? If possible, can you please check your Google Webmaster Tools and let us know about the internal linking for these two keywords as anchor text along with the number of back-links for each keyword?
The reason for such a HIT & Drop in the rankings may be due to the "Over-optimization" of the keyword as against all other keywords in the website. I've been getting the same results for one of my website for one keyword only which has reached the fourth page of Google almost 7-8 times in last one year; but never came in the top 30 rankings. Whenever I think this time the keyword will surely achieve rankings in top positions, the website goes down in rankings..as far as 15th page of Google. Analyzing this, I'm thinking about stopping the SEO work for this keyword once I get it in top #50 positions this time..and may be this keyword will be stable for few weeks..

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I think the keywords you are going after have bad toxic links with those anchor texts that are hurting you i would check into that
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While I agree with you that there are some links I should get rid of, I don't think the ranking fluctuations have to do with back links because then I would have probably saw changes to my rankings on the days of the updates.
Please correct me if this isn't the case.
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I sent you a PM
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The recent updates have not been like the previous with 1 date of change- it has been rolled out over the summer with lots of fluctuations as you can see here.
You need to remove the bad and work on getting really good links to replace the old.
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edit: sorry my response was to Rachel here and not David. Didn't want this to be misconstrued:
Yeah I don't think this is necessarily accurate. Yes most sites will see their rankings plummet the day of an update, but the update isn't a one-day event. It carries over to every crawl Google does.
Therefore if your site slips through the algorithm, it isn't guaranteed to continue doing so. Perhaps the next time around the algo catches something it didn't before (for lack of a better visual.)
There is never any harm in removing poison links, that much we know for sure. So at least if you can get rid of those we can eliminate that as a possibility, right?
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Your 100% correct that I should remove as much poison links as possible.
Google doesn't recommend using the disavow tool if you didn't receive a spam warning. Additionally google wants you to try to remove the actual link from the web itself. This would be a huge job to do if I'm not completely sure what is actually causing the fluctuations.
I should do it as soon as I can but I first need to ascertain that this is indeed causing the volatile rankings.
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Is that for the whole site, or is it for the home page? Is the home page the only page you are seeing fluctuations for? It's quite difficult to assess what's happening without seeing the site, but some of these details might help.
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The anchor text is for the whole site. The home page is not the only page I am seeing crazy rankings for. The site name is http://plasticplace.net.
Thanks so much for taking a look!