For Line parsing , you should mention the line number preceding the command 's'
$ echo "this is line 1
this is line 2
this is line 3
this is line 4
this is line 5" | sed -e '2s/line/LINUX/'
this is line 1
this is LINUX 2
this is line 3
this is line 4
this is line 5
So, for you the command is :
sed -e '2s/line/LINUX/' mytextfile
And yes , if regardless of line number , if you want to just replace the 2nd occurrence in the whole file , pLumo's answer is right.
sed -z 's/line/LINUX/2' mytextfile