The next step was to ask for a little more - I moved the water bottle. He already knew he had to touch it, so I didn't click and treat UNLESS he touched it. However, we took baby steps with how far I moved the water bottle. At first it was in front of him. Then a little lower. Then even lower. It took a few sessions, but I ultimately was able to set it on the ground.
This is often step #2 for clicker training: Teaching the horse to lower his head. This is our "calm down" cue. Asking a horse to lower his head gives us a "home base" for the horse to go back to paying attention and calming down if he gets excited. If you can do this on cue, it's like when your teacher held up her hand and said "Give me Five" and all the students got quiet and raised their hands. Once everything is orderly, you can move on with your students' attention - in this case, your student is your horse!
When doing this with the target, I practice by pointing at the target - ultimately, I want this pointing to become a cue for him to target anything I point to. Teaching a horse to target anything on cue is useful for a number of reasons. For training purposes, a number of things can be cued and shaped by first starting with a target. However, thinking about the "big picture", if Flash was afraid of something, I could ask him to target it. Given our previous training, he would know that this was a new challenge for him and just another training exercise, so, if I'm asking him to target something new and unfamiliar, it must be just another training exercise like all the other ones we've done.
Right now, targeting my green water bottle is more like a "brain break", a term teachers use for a quick and easy activity that allows students to relax but still be working for a few minutes while they take a break from more difficult activities. Flash now targets the green water bottle no matter where I put it - in fact, I'll even throw it and he goes trotting after it and touches it. (If I feel like it, I may take advantage of those new teeth growing and teach him to retrieve it!). No matter what, if I want to "end on a good note", all I ever have to do is pull out his favorite green water bottle ;)