If you drag it down too far it doesn't work. That was my problem. Just drag it a little and the space underneath will darken. Then release. To move it back to the right, drag right.
Mr_Noodle: Hazel is a great product, but from an interface design standpoint I question this behavior. You drag right to move it right, but drag down to move it left. That's not intuitive. It seems that it it should be drag right to move right, drag left to move left. Would you mind telling us the rationale for not making it that way?