Past continuous is used for describing actions that take place over a period of time in the past - not at a moment. The definition you quote is misleading.
Thus we would say:
I was sitting
I was watching
I was eating
and so on, because all these actions take some time - and because we often use these statements to introduce something else that happened:
I was sitting on the fence when it collapsed
I was watching the cat when it caught a mouse
I was eating supper when she called.
We prefer simple past tense when we do not wish to emphasise the length of time they take - and for momentary actions:
I sat on the stool that I had made.
I watched the cat as it climbed a tree.
I ate supper before doing my homework.
In many of these cases you can choose between past simple and past continuous depending on the context and what you wish to emphasise. Both are acceptable.
So you could use any of the following combinations. All are correct. It depends on what you are trying to convey:
Daniel called you at one o'clock yesterday but you were here with me.
Daniel was looking for you at one o'clock yesterday but you were here with me.
Daniel looked for you yesterday while you were here talking to me.