4. After you apply those settings you should have some text like this. Make a new layer and grab your pen tool. Start by making a point on the left side of the text and while holding shift, make another point on the right side. It should make a straight line.

5. Click a point near the “L” on the line. After you made the point, hold control and drag the point upward. Do the same thing with the point to the right except drag it down a bit so we get this nice “wave” effect.

6. After that, click the point on the far right and make a box over the text like the way I did it.

7. Go to paths on your layers palette and right click, then go to make selection. Put 0 pixel feathering and click OK.