Edit in JSFiddle

var myApp = angular.module("myApp", []);

myApp.directive("fileModel", ["$parse", function ($parse) {
    return {
        restrict: "A",
        link: function (scope, element, attrs) {
            var model = $parse(attrs.fileModel);
            element.bind("change", function () {
                scope.$apply(function () {
                    model.assign(scope, element[0].files[0]);
                });
            });
        }
    };
}]);

myApp.controller("myController", ["$scope", function ($scope) {

    $scope.$watch("imageFile", function (imageFile) {

        $scope.imageFileSrc = undefined;

        if (!imageFile || !imageFile.type.match("image.*")) {
            return;
        }

        var reader = new FileReader();
        reader.onload = function () {
            $scope.$apply(function () {
                $scope.imageFileSrc = reader.result;
            });
        };
        reader.readAsDataURL(imageFile);
    });
}]);

<div ng-app="myApp">    
    <div ng-controller="myController">
        <input type="file" file-model="imageFile"/>
        <br/>
        <img ng-if="imageFileSrc"
             ng-src="{{imageFileSrc}}"
             style="max-width: 300px"/>
    </div>
</div>