The English double winners face a tricky test against FC Copenhagen in the first leg of their Champions League last-16 clash in the Parken Stadium on Tuesday, when a poor result would fuel speculation about Ancelotti's future.
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Fifth in the Premier League and dumped out of the FA Cup on penalties last weekend, Chelsea's season now hangs on progress in a competition they have threatened to win since Roman Abramovich bought the club in 2003.
"It could be the best season we ever have in memory," Ancelotti told a news conference.
"Maybe it could be the worst. I don't know, but wait, Chelsea has not died, it is still alive."
The Italian, who won the Premier League and FA Cup in his first season at Stamford Bridge after leaving AC Milan, knows the importance Russian billionaire Abramovich places on the Champions League.
Chelsea came agonisingly close to winning it in 2008 when, but for John Terry's missed penalty in Moscow, they would have beaten Manchester United.
This season, though, their domestic form has nose-dived dramatically and they arrive in the Danish capital missing the aura they once carried on foreign trips.
NO PANIC
But Ancelotti is not the type to panic.
"This is football. It is difficult to stay at the top, sometimes you have to manage bad moments," he said.
"A lot of times I was able to manage these moments. So wait, it is not finished."
Copenhagen appeared to be a kind draw for Chelsea but the Danes are formidable at home, holding Barcelona during the group stage in which they took seven points on their own turf.
"It will not be easy. Copenhagen are a very good team with good concentration. We have to play for 90 minutes and prepare for both games," Ancelotti said.
"Copenhagen played very well in the group stages. They showed very good organisation, played very good football and they have very good players.
"It will be a game with balance. They have strength, power and timing and we are here to play our football and try to do everything to win.
"They have a fantastic tempo, so we want to have the same, we want to work hard, play our football and show our quality. If you have courage, you can win."
Fernando Torres is in line for his Champions League debut for Chelsea after his 50 million-pound switch from Liverpool and despite struggling so far, captain John Terry said the Spanish striker would be a huge boost.
"Fernando could definitely be the key," Terry said. "Being in the position we ar
