Signal comes back and is captured; wizard! (7)
I believe the answer is:
gandalf
'wizard' is the definition.
(I've seen this before)
'signal comes back and is captured' is the wordplay.
'signal' becomes 'flag' (flag is a kind of signal).
'comes back' says the letters should be written backwards.
'is captured' indicates putting letters inside.
'flag' in reverse letter order is 'galf'.
'galf' enclosing 'and' is 'GANDALF'.
(Other definitions for gandalf that I've seen before include "Tolkien character" , "Tolkien's wizard" .)