"We were looking at the sky."
Translation:Nosotros estábamos mirando el cielo.
From my understanding, this sentence must be in the past progressive tense because the imperfect tense (mirábamos or veíamos) means either "we looked / we used to look", and from what I was taught, it can only mean "we were looking" if an event interrupted it. For example, "Mirábamos el cielo cuando, de repente, oí una explosión", "we were looking at the sky when, suddenly, I heard an explosion"
In Spanish, the Progressive Tenses are always formed using some conjugation of Estar + un gerundio (the Spanish Present Participle).