Problem:
Melchizedek, the powerful king appeared to him humbly as some poor old man. Thus, in their fulfilled quiet lives, the sheep symbolized self-actualization, simplicity and humility values. They lived out their personal legends contentedly in their roam and graze.
He also extracted life lessons from watching his sheep, lessons that are reinforced in his observance and listening to his heart in the desert. As Coelho says, things are interconnected thus observance of one small bit of a creation could lead one to learn from it. Therefore, Santiago's sheep are symbols of learning through observing and the importance of observance to even the minute aspects of life.