Ancelotti, who steered the west London club to a league and cup double in his first season, has lost three of the last four games.
Rumours of Ancelotti's departure and a series of bets have seen his odds drastically reduced.
This can only be good news for Newcastle United, who play Chelsea at the weekend.
West Ham manager Avram Grant still retains favouritism at 5/6, while Roberto Mancini is 4/1 and under-pressure Wolves boss Mick McCarthy is fourth favourite at 7/1.