Repaired the hull, used mostly patch tool, it makes a very smooth blend. Used a section of the hull's stern, transformed, flipped vertically, and added to it to complete a keel shape.
step 2 of 4
Distorted the water using Filter>Distort>Glass. There are two additional sections of the hull in this, used the glass, gaussian blur and motion blur. Erased the very bottom slightly.
step 3 of 4
Shows adjustment layers for hull, also for clouds. Used the two colors shown, Filter>Render>Clouds. Then made a Levels adjustment, and stretched the layer width-wise, and finally added a motion blur with zoom to 4%. The stretching gave it a less 'filtered' look and more dramatic painted look.
step 4 of 4
Warped the scales from the Siamese fighting fish to the cheek of the mer-fish. Also used liquify on most of the ends of the fins and the tail, the lips and cheeks.
Lots of painting, blending of several layers of the water, burning, dodging and finally added some bubbles to the mer-fish's breath and scent.