[NeonSamurai]

You set the torpedo too shallow and it bounced off the curve the keel forms with the side. (Try the shot again and watch it in external view to see what i meen).

Keep in mind Ships hulls are not box shaped, they have curves, both to the bow and stern, and down towards the keel (also around the propellers and rudder), An impact torpedo to detonate needs to hit a surface between roughly 60 and 120 degrees (horizontal and vertical)

Rule of thumb is 0.5-2m deeper then the draft of the target ship. 0.5 for good weather, 2m for realy foul weather (though in that kind of weather your better off going with shallow impact torp shots) to compensate for the ship and torpedo rising and sinking due to wave action.

Also yes when set to magnetic the impact pistol also works.