In this paper, we analyze a composite decode-and-forward scheme for the two-way relay channel with a direct link. During transmission, our scheme combines both block Markov coding and an independent coding scheme similar to network coding at the relay. The main contribution of this work is to examine how link state impacts the allocation of power between these two distinct techniques, which in turn governs the necessity of each technique in achieving the largest transmission rate region. We analytically determine the link-state regimes and associated relaying techniques. Our results illustrate an interesting trend: when the user-to-relay link is marginally stronger than the direct link, it is optimal to use only independent coding. In this case, the relay need not use full power. However, for larger user-to-relay link gains, the relay must supplement independent coding with block Markov coding to achieve the largest rate region. These link-state regimes are important for the application of two-way relaying in 5G networks, such as in D2D mode or relay-aided transmission.