could any one help,

I'm trying to get this effect on my avie:



And I know how to do it, but maybe i've accidently turned off something, but lately it's not letting me do it anymore. It's not highlighting red when I drag the rounded rectangle tool onto the avie. Nothing happens at all.

Here's a cap of my photoshop (cs2) so if anyone can spot something thats wrong, let me know please!



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