Martha Stewart Living Omnimedia: Buy on Hope and Sell on Reality

Whoever said that crime doesn't pay should study the price chart of Martha Stewart Living Omnimedia (MSO).

From the time Martha resigned as chief executive officer of MSO, was found guilty of lying about her sale of ImClone (IMCL) stock, sentenced, and just before she was released, MSO climbed from $5.26 to $37.40 an incredible 611 percent gain in just 16 months. The upside move was propelled by short-term traders, short sellers buying back their short positions, and investors who liked Martha, thought the stock was undervalued or reasoned that all of the bad new was behind the stock. Since her release, MSO has been extremely volatile.

Events like her "I just want to focus on my salad." comment made when asked about her legal woes by Jane Clayson on the CBS The Early Show, her indictment, conviction, sentencing, release and promotional gigs for upcoming TV shows have sent the daily volume of shares traded skyward.

Investors' behavior since Martha's saga began in early 2002 has been a tale of buying on the hope and anticipation of good things to come and selling on the realization that the future may not be so rosy after all.