This article aims to examine the relationship between image and narrative by means of Peirce’s first trichotomy of qualisign-sinsign-legisign or, for the purposes of the current argument, image-diagram-metaphor. It is argued that narrative, as an extended metaphor, can be examined in three modes: in the image; schematically, in the imagination; and allegorically or in a thought experiment, through hypothetic interpretation. The article outlines two kinds of diagrammatic reasoning emphasized by Peirce: corollarial deduction in which the image is ‘literally seen’ and (...) the reasoning steps are manifest in its conclusion; and theorematic deduction where the conclusion in a diagram is subject to a hypothesis which transforms the image into something new. Demonstrating the breadth of diagrammatic reasoning with reference to the 2018 film, The Shape of Water, the article seeks to explore how allegory and diagram are mutually cooperative, based on three ontological modes: the expressive, the cognitive, and the symbolic. Its primary focus, then, is not so much on the story events of the narrative, as the way that they are visualized and characterized as the fairy story unfolds. It is suggested that the interpreting activity involved in allegory and diagram ties interpretation to metacognition, ultimately (re)recognizing the image in The Shape of Water in an attempt to ascertain the meaning of love. (shrink)