The Dark Eye

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While this is an interesting concept, I found it best NOT to soul jump during
the nightmares.  This gives you the entire dream uninterrupted.  Simply pause
and wait a moment for the option to go away and proceed.
 
If you wish to soul jump, this is the way to do it...  After waving your hand
over a character or pointing at them, if you get a close-up of them and see
your reflection sparkling in their eyes, quickly click on that person to jump
into their soul.