Is there some way of automatically farming wool from sheep?

The only way to shear a sheep "automatically" is to confine (wild) wolves and sheep in an enclosed area. I'm working on a bubble in which all animals fall into, then depending on their size and shape are sorted then slaughtered.

I will have a glass dome with a 1x1 hole in the bottom and water leading to the hole. Wolves naturally occur in my spawning grounds, and fall in with the others. Wolves shear the sheep, wool falls down the hole to a collection point, at this time I don't really care about the wolves so they oddly enough filter through the pig separator and end up in my collection point. Then the other animals are sorted then killed for their drops.

(based on Ethos design)

Here's an elaborate solution involving trapping a skeleton that appears to work well. It seems that this setup could easily be changed to use a snowball/arrow dispenser instead of a skeleton, however the business of keeping it fueled, and firing at the right time would be an issue.

AFAIK, the only way to automatically shear a sheep is to have a skeleton shoot it. Etho has a video briefly explaining how that would work. Basically, you need to have two skeletons, stand in the middle of them so they start to shoot each other, and then place a sheep between the two, using water streams and stuff. I'd guess it's pretty complicated.