Right in the Eye
From the Super Mario Wiki
There is an unthreaded needle on the left side of the screen and a hand holding a thread moving in from the right side. The player must maneuver the hand so that the thread goes through the eye of the needle. When up or down is pressed on the , the hand will keep moving that direction until it reaches its boundaries.
The WarioWare Gold remake uses the stylus to move the thread.
WarioWare, Inc.: Mega Microgame$!
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