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Make another duplicate of the bug layer and place it like shown below. Add a layer mask and mask until it looks like shown below.
Duplicate this layer, free transform and flip horizontal. Place it on the other shoulder. Modify the mask slightly so it doesn't look identical to the other one. Group all the alien layers and name the group "Alien Body".
Duplicate the sea horse layer and move it on top. Free transform until it looks like shown below, than add a layer mask and mask away all but the head. White a small hard white brush paint 2 nostrils in the layer mask.
Duplicate this layer, enter free transform, right click and choose flip horizontal. Place on the other side of the head and tweak the layer mask until it fits the head. Duplicate again and place it like shown below.
Add a new layer and using a black brush paint a small straight line were his mouth should be. Duplicate the texture layer and move it on top. Change it's blending mode to Color Dodge and lower opacity to 31. Add a layer mask and mask away all but the head. Group all these head layers and name the group Head. Select both "Head" group and "Alien Body" and press Ctrl+G to group them. Name this group "Alien".
Alt+Click the eyeball icon next to the "Alien" group to turn off the visibility of all other layers, click on the alien group so it's selected then press Ctrl+Alt+Shift+E to make a new layer from all visible pixels. Name this layer "Alien". You can turn on the visibility of the "Background" group.
Using Sponge tool desaturate the hot reds. Use clone stamp tool to make the transition between head and body smoother.
Add a layer mask to the "Alien" layer and using a white hard brush make mask his hands and left foot until the image looks like shown below. You can also turn off the visibility of the "Alien" group. Enter advanced blending mode and use the settings shown below.
Select a soft round brush tool and sample a color somewhere from his arm and paint his tentacles. Enter advanced blending mode and use the settings shown below.