Uplinker: Yes, it is entirely possible, that he did not have the performance to hover under these circumstances, but we will not know this, until the report comes out, or better sometbody is interested enough to look it up.
I personally am not sure, if he hit something first and then the horn came on, indicating low RPM or he overpitched - asked too much power - and then went into the trees. But that does not matter.
A short explanation.
Hovering Out Of Ground Effect (OGE) requires the most power. He was definitely in this situation above the trees. As we have already established, he was high, hot, heavy and slow.
Hovering In Ground Effect (IGE) needs much less power. There can be a lot of difference between IGE and OGE. The difference can be several thousand feet. The difference in height over the ground between IGE and OGE is roughly one rotor diameter.
Flying straight and level or even climbing a bit, as in this case, does take a lot less power, than hovering. That wasn't the problem here. He had way enough power to do that.
To answer your question and taking in account, that we do not know the altitude he was flying, he could have hovered IGE on that ridge, but not be able to hover OGE. That is quite normal for helicopters. In that case, the pilot has to plan his approach to the desired landing spot in a way, that he looses translation lift (the help you get from air speed at about 16 to 20 knots, or even lower, depending on the ship) at the moment he enters ground effect. That sounds crazy but isn't a big deal, as long as your landing spot is big enough to do that, i.e. provide ground effect. It is frowned upon as professional pilots, but I think many of us even have landed in spots where we didn't even had IGE performance and on take off thrown ourselves over the cliff or platform to get airspeed into translation lift. Bad, bad, bad.
Clear the ridge and descending was probably his plan, but the clouds were in the way. Going into a cloud in a helicopter is deadly. Most helicopters are not IFR certified, especially not the AS 350 single engine versions. They have no autopilots. Helicopters are unstable in flight. If you let go of the controls, they will do whatever they want (also depending on the ship) and crash shortly thereafter. The pilot himself may have been IFR certified, but chances are high, he was not or not current. Therefore he did not want to go into the clouds for any reason. Even though most helicopters have some instruments to stay straight and level, should you inadvertently go IMC, the results are normally not good (90 seconds to live video explains it all). That is, why so many helicopters do the scud running and accidents like that happen.