How do I overlap a Shape onto an Image?

I am using Pages 09 (4.0.5). I want to import a picture (a JPEG file) into a document, then put a red circle around a part of the picture. I can't figure out how to do this. I pasted my JPEG image into my document, and I created an ellipse with the Shapes menu, but try as I may, I cannot move the ellipse on top of the picture. It always moves back next to the picture. The Help and the Pages user guide are useless for this. How do I superimpose a Shape on a picture?