It depends on what you really mean to say.
A singing lady in the sea no longer
possesses her power of allure. - This means "A singing lady in the sea does not have her power of allure any longer".
A singing lady in the sea
who no longer possesses her power of allure is just a singing lady in the sea. - The clause "who no longer posses her power of allure" describes a singing lady. It is an adjective clause, and "who" is optional. As well, "who" can be replaced by "that". This adjective clause can be reduced to a phrase, as we can observe in a rewrite of this sentence.
A singinng lady in the sea
no longer possessing her power of allure is just a singing lady in the sea.
To conclude, we can now see the difference between "
no longer possessing" and "
no longer possesses".
I would have to say that this is a brilliant answer to your question even at the risk of sounding immodest.
