How to move sub-headings to under other headings in emacs org-mode

You could use C-c C-w (org-refile) and specify the heading where you want to send your TODO item.

As you'll see in this function's documentation (C-h forg-refile), you can customize the org-refile-targets and org-reverse-note-order variables to determine the list of possible target headings and the position of the moved item within the target heading.

Here are 2 options:

1. Promote Item 2 to the top level with M-left, then move it down below "TOMORROW" with M-down, and finally demote it under "TOMORROW" with M-right.

2. Cut the "Item 2" subtree with org-cut-special (C-c C-x C-w), then paste it under "TOMORROW" using org-paste-special (C-c C-x C-y).