Use the rubberband tool.
There's a little arrow next to each video track (and audio track) if you click on it, you'll see a red bar appear as part of the clip. You can move the red bar (rubberband) to change the level of transparency. Make sure it is in a video track above video track 1 (like video track 2

). If you need more information, there's a whole section on this in the help file that comes with premiere....