You have to start dragging from the left side of the fish (the point that is most to the left). Then continue the silhouette of the body to the right until you end on the other side (on the point where the body ends and the tail starts). There, end the drag and lift the click.
If you are doing the drag correctly, you should hear a cutting sound.
(Also, use your mouse position to do so, the knife is just for visuals)