It is…somewhat. Blender’s displace node isn’t really a pixel displacer, it scales the pixels rather than displacing them. You’d be better off using geometry (a tube or some such) and the ray trans effect. If a tube is to crude then you can warp the geometry or apply a texture to it which is set to UV in “map input” (after unwrapping of course) and also set to Alpha in “map to”. Enabling the shadeless button will keep specular highlights from showing up in the transparent alpha areas. It may be more work doing it this way but the effect beats the heck out of Blender’s displace node.
By learning how to properly mask objects via manipulation of alpha channels, separating scenes, and render layers/passes. e.g. the screen-shot shows how to create an “Alpha Exclusion” matte (exclude overlapping). Most of it boils down to understanding pixel math within the context of Blender’s compositor (the mathematical functions performed via Blender’s various “Mix” node settings) and/or understanding how to configure render passes/layers & scenes to achieve the desired effect.
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