I think between my research a couple of years ago and the documentary Never Sleep Again, in my mind, the Nightmare on Elm Street series has kind of built itself up as the only respectable slasher series. It was consistently trying different things within the confines of slasher sequels, while also having an almost enclosed narrative because it rather smartly stuck to one town or one circle of people. Within the enclosed narrative, only maybe parts 2 and 6 were somewhat jettisoned out of the entire Nightmare narrative to various extents, because Nancy was not linked much in those films. Nancy exists in a sort of off-screen space in 2, with the new inhabitant of her room finding her diary. When she returns for part 3 and later dies after teaching the kids that their "superpowers" within their dreams can help defeat Freddy, she still manages to become the link to the fourth and fifth films.
Part 4 quickly jettisons the remaining survivors of Part 3, who have returned to relatively normal teenage, high school lives. Kristen manages to call her friend Alice into her dream right before she dies. Alice then gains Kristen's power. As each of her friends and her brother begin to fall victim to Freddy, she gains their skills or powers. Her brother was into karate, her above-pictured friend was into weightlifting, another friend is highly skilled in science and can create tools out of simple objects. Alice becomes the only person who can defeat Freddy with her superpowers and release the souls of her friends and his other victims. Essentially, the film is a sweet story about how your loved ones never really die wrapped in a superhero origin story. This is not to say this storyline is maintained into the fifth film exactly, but it's an interesting experiment for the fourth Nightmare film.