How can I optimize this code for unit testing

First of all: Use a StringBuilder instead of System.out.println so you can easily compare the result of your method with an expected output.

Your test could look like: (I renamed you method to draw and moved the size to the instance.)

@Test
public void test4()
{
    StringBuilder expected = new StringBuilder();
    expected.append( "   * \n" );
    expected.append( "  * * \n" );
    expected.append( " * * * \n" );
    expected.append( "* * * * \n" );
    expected.append( " * * * \n" );
    expected.append( "  * * \n" );
    expected.append( "   * \n" );
    assertEquals( expected.toString(), new Diamond( 4 ).draw() );
}

After you have all your tests (I have just created some for 0-4) you can try to extract some methods with duplicate code.

public class Diamond
{
    private int size;

    public Diamond( int size )
    {
        this.size = size;
    }

    public String draw()
    {
        StringBuilder result = new StringBuilder();
        for( int ucount = size; ucount > 0; ucount-- )
        {
            appendSpaces( result, ucount - 1 );
            appendStars( result, size - ucount + 1 );
            newLine( result );
        }

        for( int lcount = 1; lcount < size; lcount++ )
        {
            appendSpaces( result, lcount );
            appendStars( result, size - lcount );
            newLine( result );
        }
        return result.toString();
    }

    private void newLine( StringBuilder result ) // just for better readability
    {
        result.append( "\n" );
    }

    private void appendStars( StringBuilder result, int count ) // just for better readability
    {
        repeat( result, "* ", count );
    }

    private void appendSpaces( StringBuilder result, int count ) // just for better readability
    {
        repeat( result, " ", count );
    }

    private void repeat( StringBuilder result, String string, int count )
    {
        for( int c = 0; c < count; c++ )
            result.append( string );
    }
}

If you want to get rid of one of the loops you could even merge it to:

public String draw()
{
    StringBuilder result = new StringBuilder();
    for( int ucount = size; ucount >= -size; ucount-- )
    {
        boolean isMiddleRows = ucount == 0 || ucount == -1;
        if( isMiddleRows ) continue;
        appendSpaces( result, Math.abs( ucount ) - 1 );
        appendStars( result, size - Math.abs( ucount ) + 1 );
        newLine( result );
    }
    return result.toString();
} 

It's pretty cool to have enough tests do try such refactoring :)

If you want to unit test the System.out output, you can set the PrintStream of System.out by using the setOut method.

private final ByteArrayOutputStream outContent = new ByteArrayOutputStream();

@Before
public void setUpStreams() {
    System.setOut(new PrintStream(outContent));
}

@After
public void cleanUpStreams() {
    System.setOut(null);
}

@Test
public void testOut() {
    System.out.println("hello");
    System.out.println("hi");
    String[] linesOfOutput = outContent.toString().split(System.getProperty("line.separator"));
    assertEquals("hello", linesOfOutput[0]);
    assertEquals("hi", linesOfOutput[1]);
}

Of course, it would be better to pass an OutputStream as parameter to the method and write to that.

public void writeDiamondShape ( int num, OutputStream outputStream ) {
    ...
}

As for optimization

public static void writeDiamond(int num){
    int loops = num * 2 - 1;
    int stars = 1;
    for ( int i = 0; i < loops; i++ ) {

        // Print spaces
        int spaces = Math.abs(num - i - 1);
        for ( int j = 0; j < spaces; j++ ) {
            System.out.print ( " " );
        }

        // Print stars
        for ( int j = 0; j < stars; j++ ) {
            System.out.print ( "* " );
        }
        System.out.println();

        // Increment / Decrement stars to print next time
        stars += (i+1 < num) ? 1 : -1;
    }
}