Combine water, 1/4 teaspoon chili powder, salt, pepper, and eggs in a small bowl, stirring well with a whisk.
Place bread in a food processor; pulse 5 times or until coarse crumbs measure 1/2 cup. Add 2 tablespoons egg mixture, fish, parsley, and garlic; process until a thick dough forms. Shape dough into 16 (1-inch) balls.
Heat oil in a large nonstick skillet over medium-high heat. Dredge fish balls in flour and dip in remaining egg mixture. Add fish balls to pan; sauté 10 minutes or until browned on all sides, turning frequently.
Combine 1/2 teaspoon chili powder and cocktail sauce. Serve with fish balls.