I am in the desert world and I'm at a little water pond to the right of the ship. There's a guy there floating on a cloud with a fishing rod. Ican see the fish shadows below the water and they nibble on the line when I drop it down, but nothing else happens. I've tried to time the pull so that I lift the line up at the exact time the fish bites but it doesn't work. The fish look like shadows so maybe I need to do something to activate them first?
You just have to drop the hook down and wait for one of them to eventually bite. I don't think there is anything that you can do to make them bite faster. They looked like shadows for me too. Just drop the hook and wait for one of them to eventually bite it and then you pull back on the left stick to pull the fish out of the water.